Dairy Crest hopeful of strong results – but cautious over impact of inflation
Cheese and butter manufacturer Dairy Crest has said it expects to deliver a strong performance in the first half of the new trading year – but warned it was being hit by inflation.
The dairy company, which has its innovation centre at Harper Adams University near Newport, said it anticipates combined volumes of its four key brands – Cathedral City, Country Life, Clover and Frylight – to be ahead of last year.
At the end of the first quarter it was trading in line with last year, but sales volumes have accelerated since then, and Dairy Crest now expects to deliver an improved set of figures when it reports interim results for the period to September 30.
The results are due on November 10.
Half year profit is expected to be ahead of last year, although Dairy Crest's expectations for the full year remain unchanged.
Mark Allen, chief executive of Dairy Crest, said: "We continue to see good momentum from our key brands.
"Our butters, spreads and oils business delivered strong volume growth and increased market share in the first half.
"There has been a very positive customer response to the Cathedral City refresh which should underpin future growth of the brand."
But he added that the improved milk price being paid to farmers would hit margins in the second half.
"Recently we have seen inflation across all dairy markets," Mr Allen said.
"To date we have announced increases amounting to 12 per cent in the milk price we pay our farmers. Cream prices have been particularly affected, doubling over a very short period.
"This sudden cost inflation is likely to have an impact on butter volumes and margins in the second half.
"As a strong branded and added value business, Dairy Crest is well placed to deal with inflationary pressures.
"As such our outlook for the full year remains unchanged."
Shares jumped in early trading yesterday, but later fell away.
Sales volumes of Cathedral City are set to fall because the company did not discount the cheddar cheese brand as much as competitors, but margins have improved.
