Dairy Crest brands take ‘significant’ market share

10-Feb-2017 - Last updated on 13-Feb-2017 at 11:01 GMT

Cathedral City owner, Dairy Crest, reported in-line financial expectations for the full-year

Dairy Crest’s Clover, Frylight and Country Life brands took “significant share” in their respective markets over the past nine months, the dairy firm said in its third-quarter trading update, with analysts predicting a pre-tax profit of £61.5M.

Its financial outlook for the full year remained “in line with expectations”, Dairy Crest claimed. Analyst Shore Capital welcomed Cathedral City’s improved performance, with third-quarter sales ahead of the same period last year.

Shore Capital analysts Darren Shirley and Clive Black said: “We are encouraged that Dairy Crest can report key brand volumes over the nine month period ‘in line with the same period last year’ given the structural headwinds that remain in the spreads category.

‘Modest 2–3% decline’

With key branded volumes reported ahead 2% in [the first half], this implies to us a modest 2–3% decline over the [third-quarter] period.”

Inflation – owing to the weak value of the pound – meant costs increased over the past three months, Dairy Crest said. Therefore, its price paid to milk farmers increased to 8.28p – a 38% increase. Increased input costs for its butter business meant net debt was expected to be about £12M more than predicted.

Dairy Crest chief executive Mark Allen said: “The business has continued to make progress during the quarter. Our brands have performed well, supported by successful innovation and brand investment. I’m particularly pleased to see the improvement in Cathedral City’s performance.

‘Significant improvement’

“At the new Davidstow functional ingredients facility we are seeing significant improvement in the percentage level of demineralised whey meeting infant formula grade. This is important in maximising future opportunities in this market.”

Allen said the research partnership with Danisco Animal Nutrition – to explore potential uses of a prebiotic for an infant formula – marked a “significant step” in developing products “beyond infant formula”. This had exciting potential for the future, he added.

Meanwhile, in its last trading update, Dairy Crest reported a 19% rise in profit before tax to £19.1M. In the half-year trading update, the dairy producer said its rebranded Cathedral City boosted its balance sheet.