Dairy Crest milks growth despite production problems

Dairy Crest continued to milk revenues in the third quarter despite a challenging market environment and production setbacks.

The UK dairy foods company said it was trading in line with expectations with sales volumes up 4.0% across its key brands Cathedral City, Country Life, Clover and FRijj for the last nine months of 2012.

However, it represents a slowdown from the double digit increases seen in the first six months of the year. The company blamed tougher comparatives it has been trading against in the quarter.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

"This year has been a tough one for dairy farmers with poor weather and high animal feed costs making production difficult and expensive," Dairy Crest said in a statement.

"With the support of our customers we have paid more to our farmers to help them overcome the challenges they have faced, and to encourage them to continue to provide us with high quality British milk."

The FTSE 250 group added it was on track to delivering savings around £23m this year, aided by strong performance from new products launched in recent years.

The sale of its French branded spreads business St Hubert strengthened Dairy Crest's financial position. The cash from the transaction will be used to supplement growth and make targeted acquisitions in the future.

Mark Allen, Chief Executive of Dairy Crest, said: "Dairy Crest has delivered a solid performance in the third quarter.

"The sale of St Hubert has significantly strengthened Dairy Crest's financial position, and has provided a strong foundation for the future. We still hope to use some of the proceeds to supplement the organic growth that our brands continue to deliver, but we are determined that any acquisition must deliver strong returns for shareholders.

"We do not currently anticipate that any significant acquisition will be made in the near future, and accordingly we have identified a number of internal capital projects to support the continued growth of the business. We also intend to restructure our balance sheet."

RD