Shore Capital highlighted the contrasting performances of cheese and spread brands, while judging that trading was broadly in line with predictions during six months to September 30.
“Cathedral City growing sales and share, with Frylight also said to be sustaining good momentum; this will surprise few in the market,” said analysts Clive Black and Darren Shirley.
“Equally, the UK spreads market remains demonstrably challenging, which has contributed to falling sales of Clover and Country Life.”
Trading update at a glance
- Cathedral City cheese and Frylight cooking oil: Strong performance
- Clover and Country Life spreads: Falling sales
Dairy Crest warned that first half profits for its cheese, spreads and butter businesses would be behind those in the first half of last year. But the company expected performance to be weighted in the second half.
Input costs have fallen due to plummeting milk prices, but Dairy Crest said the impact on the cost of cheese was delayed because the dairy product takes about a year to mature.
‘Largely as we expected’
“The first half of the year has played out largely as we expected,” said chief executive Mark Allen.
“Lower cheese costs and an expected improved performance from our spreads and butters business in the second half mean that our full year expectations remain unchanged.”
Dairy Crest has made investments to enable the manufacture whey powder and a prebiotic called GOS (galacto-oligosaccharide) at its Davidstow creamery in Cornwall.
It expected to start selling whey and GOS products later this financial year.
Allen said: “Our investment to manufacture demineralised whey powder and GOS is almost complete and we look forward to accessing new sales channels in fast growing global markets in the second half of the year.”
Shore Capital looks forward to final approval from the Competition and Markets Authority of the sale of Dairy Crest’s dairies to Müller – but added a note of caution.
‘Nothing done until it is done’
“In the world of competition law nothing is done until it is done … however, we would be very surprised to see this potential new combination now fall through,” Black and Shirley said.
“This is a fundamentally good deal for British dairy farming in our view.”
Allen has long promised that the deal would deliver economies of scale and cost efficiencies that would help the UK compete in global markets.
"We have always believed the sale of our dairies operations is good news for the whole UK dairy sector which is currently facing significant challenges arising from low dairy commodity returns,” he said.
Dairy Crest is expected to release interim results on November 5.
Verdict on sale of dairies
“This is a fundamentally good deal for British dairy farming in our view.”
- Clive Black and Darren Shirley, analysts at Shore Capital