Milk, cheese and spreads group Dairy Crest is looking to close two of its dairies and has revealed that a Tesco contract will not be renewed.
The company said it has proposed to consult on the closure of its dairies at Aintree (Liverpool) and Fenstanton (Cambridgeshire) later this year as part of its plan to cut costs and sustain profitability in an "extremely challenging market environment" for the liquid milk business.
"The proposals we are announcing today are part of a series of actions designed to restore our Dairies business to an acceptable level of profitability over the medium term," said Chief Executive Mark Allen.
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Dairy Crest expects there to be a cash exceptional costs of £15m associated with these closures - these will be charged in the 2012-2013 fiscal year.
Meanwhile, the group announced that it was informed yesterday by Tesco that the current contract - coming to an end in July 2012 - to supply liquid milk will not be renewed. This accounted for 3% of Dairy Crest's liquid milk sales in 2011/12.
"The loss of this contract does not change the Group's wider and important relationship with Tesco across key UK brands Cathedral City, Country Life, Clover and Frijj and will not impact Dairy Crest's profit expectations for the year ending March 31st 2013," the company said.
On the positive side, the group said that due to stronger-than-anticipated cash collection, net debt at March 31st will be around 5% lower than market expectations.
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