Dairy Crest bears £36M costs as profits nose dive

By Rod Addy

- Last updated on GMT

Dairy Crest's milk input costs fell in the past financial year
Dairy Crest's milk input costs fell in the past financial year

Related tags Dairy crest Milk

Dairy Crest bore £36.3M of costs in the past year, which dragged pre-tax profits down significantly for the business, while revenue also fell.

Reporting its annual results, the company said consolidating spreads and butter production at Kirkby, installing a bulk butter churn at Severnside and creating an innovation centre at Harper Adams University had cost £16.7M.

However, it said it hoped to recoup further costs generated by the innovation centre from its sale of its Crudgington plant in Shropshire, which it announced plans to close in 2012.

Further closures of its Hanworth bottling site and its specialist cream potting facility in Chard, announced in September last year, cost £11.8M.

The ongoing sale of its dairies operations and investment in its demineralised whey and galacto-oligosaccharide production at Davidstow constituted the rest of the costs it faced across the year, it said.

Against that, the company claimed butter and spreads consolidation had helped it meet targets to cut costs in other areas by £20M.

Dairies division

The business found trade in its dairies division, which represents the biggest slice of its sales and which it has agreed to sell to Müller UK & Ireland Group for £80M, tough. Profits fell despite lower milk input costs, reflecting intense competition and significantly lower returns for dairy commodities, it reported.

Profits from the sale of closed depots fell slightly year-on-year to £17.6M, versus £18.2M in 2014. The dairies business stabilised in the second half of the year and losses (before property profits) reduced from £11.9M in the first half to £3.9M in the second half.

However, the dairy sector had remained challenging and contract renewals and continued weak commodity returns would continue to put pressure on the division in 2015, the firm said.


Although it had kept its contract to supply Morrisons for a further three years, the volumes it expected Morrisons to buy to drop by about a third from March.

That said, the Müller deal had received shareholder approval and, subject to approval from competition regulators, was expected to complete in the coming financial year, said Dairy Crest.

Despite continued food deflation, it managed to grow cheese and spread sales across the year, although sales of its key brands, Frijj, Cathedral City, Clover and Country Life remained flat overall. Strong performance of the first two offset declines in the second two, it said.

Group revenue for the year to March 31 fell by 4%, from £1.4bn to £1.3bn, with pre-tax profit falling by 59%, from £54.2M to £22.1M.

‘Well positioned’

However, Dairy Crest ceo Mark Allen said: “Looking ahead, Dairy Crest is well positioned for sustainable, profitable growth.

“Over the coming year as a whole we expect results to benefit from the continued growth of Cathedral City, ongoing cost savings and the completion of our project at Davidstow where we will add value to our whey stream by producing ingredients for infant formula. This growth will be second half weighted.

“We expect that our net debt, which at the year-end remains within our target range, will fall once we have completed our major investment projects. The receipt of the proceeds from the sale of our dairies operations will accelerate this reduction.”

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