Dairy Crest to increase prices again in October and November

By Jim Cornall

- Last updated on GMT

Dairy Crest is hiking the price of its milk in October and November, ahead of its interim results, which will be announced on November 10.
Dairy Crest is hiking the price of its milk in October and November, ahead of its interim results, which will be announced on November 10.

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UK company Dairy Crest announced on Monday (September 19) a further 1.5ppl (1.95 cents) milk price increase to be phased in over two months from October 1, 2016.

The increase consists of 1ppl (1.3 cents) added to the October price, followed by a further 0.5ppl (0.65 cents) from November 1, 2016.

Ruth Askew, head of procurement at Dairy Crest, said that there has been inflation across dairy markets and milk volumes continue to fall, and that the company wanted to reflect the market conditions as soon as possible in its October and November milk prices.

Trading update

Dairy Crest has also issued a pre-close trading update for the six months ending September 30, 2016, ahead of announcing its interim results on November 10, 2016.  

The company says that in the first half, it expects that combined volumes of its four key brands, Cathedral City, Country Life, Clover and Frylight, will be ahead of last year.

This is an improvement on the first quarter, which was in line with the previous year.  

Dairy Crest says that Clover, Country Life and Frylight are all showing strong volume growth and continue to increase market share.

Cathedral City, however, is predicted to show a small volume decline in the first half of the year. The company says this is due to discounting less than competitors to maintain the brand’s positioning within the category.

The company says it is benefiting from production efficiency improvements at its demineralized whey and galacto-oligosaccharide facilities in Davidstow, while developing the customer base through its partnership with Fonterra.

Profits up

Dairy Crest said that it expects its half-year profit to be ahead of last year and expectations for the full year remain unchanged.

However, Connor Campbell, a senior market analyst at www.spreadex.com, said that Dairy Crest’s milk “soured this Monday as the company warned that an increase in the price of the white stuff will impact margins in the second half of its fiscal 2016.”

He added that this dragged the stock lower by nearly 2.5%, despite the fact that Dairy Crest says its half-year figures will be ahead of where they were this time last year.

“It will be interesting to see if the negative reaction to Monday’s update will see a sustained fall from the peak Dairy Crest hit at the start of September, or whether the underlying positives from the statement can carry it back above £6.80 ($8.85),” ​Campbell said.

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