Revenue for the UK company for the year ending March 31, 2016, was £422.3m ($611.1m), down from £448.2m ($648.6m) the year before. However, profit before tax rose from £36.8m ($53.3m) to £45.4m ($65.7m).
Net debt rose by 15% to £229m ($331.4m), with basic earnings per share rising 30% to £0.279 ($0.404), or 1%, to £0.345 ($0.499) for adjusted basic earnings per share.
Focus on dimineralized whey and GOS
Mark Allen, chief executive, said that although the company expects food price deflation to persist in the short term, the business is well positioned to deliver profitable and sustainable growth.
“The other focus for 2016/17 will be on accelerating sales of demineralized whey and GOS (galacto-oligosaccharides), the new infant formula ingredients and continuing to explore further applications for GOS,” Allen said.
During the results presentation, Allen highlighted the opening of the Innovation Centre at Harper Adams University, the sale of the dairies business significantly reduced sites, headcount and complexity, and a new IT system infrastructure is being installed.
He also noted that Dairy Crest acquired the outstanding 50% of Promovita Ingredients during FY2016.
Allen spoke of the positive results for Cathedral City cheese, which grew volumes by 6.4%and accounts for 55% of UK branded cheddar sales. He noted a spreadable relaunch in May 2016.
Positive results for key brands
In a video presentation on its website, Allen said he was happy with the results.
“Our profits in the second half were more than double that in the first half. Our four key brands, Cathedral City, Clover, Country Life and Frylight were all in volume growth in the second half. In the environment that we're facing at the moment, that's an excellent performance. We finally completed the sale of our dairies business. That's transformational for Dairy Crest.”
Allen said that innovation was key to Dairy Crest’s growth.
“We have a target that 10% of our sales should come from innovation in the previous three years. This year, it's 11%,” he said.
“The biggest factor is the launch of the additive-free version of Clover, which is generating an awful lot of sales in the second half of the year.”
Fonterra role crucial
Cost reduction remains a priority, he added.
“Cost saving is part of our DNA. We flagged up at the interims that we'd look to take about £5m ($7.2m) out of our ongoing cost base through simplification etc.”
The partnership with New Zealand cooperative Fonterra also was something Allen mentioned for its importance.
“We're working with our agents Fonterra on other life-stage uses for GOS, in the elderly, people post-operations, etc, and finally we've got some interesting work that we've been doing with animal nutrition, looking at the benefits of GOS when it's fed to chickens and pigs in particular.
“Fonterra take all our product, they take all our demineralized whey and sell it globally, and they take all our GOS in human nutrition and sell it globally. They are a superb partner to have. They've been very helpful in commissioning the plant from a technical and environmental point of view, and we see this as a massive opportunity for Dairy Crest going forward, and I think if you asked Fonterra they would see the same as well.”
Hardship for farmers
At the financial presentation, Allen responded to a question about the price farmers are being paid for milk.
“I think it's fair to say life has been pretty tough for farmers, generally speaking,” he said.
“I think ours on balance have fared a little better than everybody else. Our prices have held up slightly higher but we shouldn't underestimate the pressures that farmers are under.
“Our philosophy is really very simple. We want to pay fair and market-related prices, and I think we do that consistently over time. We want that farming base to be intact as we come out of the downturn, in a way that's vibrant and happy and not do anything that's going to kill off the base.”