Cheese and property boost profits at Dairy Crest

10-Nov-2011 - Last updated on 11-Nov-2011 at 13:51 GMT

Dairy Crest aided by higher cheese prices

Higher cheese prices and profits from property sales helped Dairy Crest to a strong financial performance for the period ending September 30, according to city analysts.

Experts are also attributing a delisting of competitors to its spreads business as a key factor in the positive performance that saw the firm post an overall pre-tax profit of £39.2M for the period. This represents an increase of 9% from £36.1M the previous year.

Revenue was also up 2% to £796.2M compared with £776.9M in 2010. The Cathedral cheese producer also saw a rise of 16% for adjusting earnings per share from 21.4p to 24.8p.

Damian McNeela, analyst at Panmure Gordon, said: “Dairy Crest’s interims are broadly in line with adjusted profit before tax increasing 9% to £43.7m, including property sales of £4.6m. The results show Cheese profits up 16% benefitting from higher prices.

In Spreads, St Hubert benefitted from the de-listing of its competition for part of the period delivering profit growth of 16%. However, the Dairies business showed a 90% decline in profitability reflecting the tough environment.”

Delisting

Divisionally, the firm’s cheese business saw an increase in operating profit of 32% to £16.5M. In spreads, operating profits also rose by 17% to £31.7M, driven by both major competitors in France being delisted since June following disagreements on price increases.

These figures offset the decline in the dairy business, excluding the property gains of £4.6M, which McNeela said reflected the “very challenging” operating environment in liquid milk.

The firm expects that the dairies business should benefit from the seasonal improvement in milk quality but is also taking action to reduce costs and improve efficiency, he added.

Long term value

Mark Allen, Dairy Crest ceo, said: "Dairy Crest has delivered a robust performance during the first half of the year. In line with our strategy, we have continued to grow our key brands, reduce our costs and control our debt.

We are concentrating on implementing initiatives that will deliver long term value for everyone involved with our business - providing consumers with high quality and great value, paying a fair milk price to farmers and continuing to invest in marketing, innovation and facilities.”

Looking forward, the consumer environment is challenging and increasingly difficult to predict, he added.

Despite this, Allen said he remained confident that the firm will deliver profits for the year in line with its expectations.