The UK company says its outlook for the full year remains in line with expectations.
The statement says that, “In a challenging market, our cheese and spreads brands have performed well, with all four key brands increasing or maintaining value share in the quarter. Combined sales of Cathedral City, Country Life, Clover and Frylight over the nine-month period have remained broadly in line with the same period last year and volumes have increased by 2%. This is a robust performance in what remains a deflationary environment for both cheese and spreads.”
Infant formula ingredients production begins
Production of demineralized whey powder and galacto-oligosaccharide (GOS) has commenced at the factory in Davidstow. These are both ingredients for the growing, global infant formula market which Dairy Crest says will give it access to new growth markets and customers.
On December 18, 2015, Dairy Crest announced that it had acquired the outstanding 50% share of Promovita Ingredients Limited, the joint venture established to develop and produce GOS. This gives Dairy Crest sole control over the development of the GOS business and trials looking into further applications for GOS are continuing.
In December 2015, the Dairy Crest innovation team moved into a new Innovation Centre on the Harper Adams University campus. Dairy Crest said that the collaboration affords access to leading food and agricultural research and will enhance future innovation capability.
Sale of Dairies operations
On December 26, 2015 Dairy Crest completed the sale of its Dairies operations to Müller UK & Ireland Group. Dairy Crest noted that because of high milk production and a difficult 2015 for the industry, losses in the Dairies division continued until the sale.
Dairy Crest says that they now expect net proceeds before working capital adjustments to be around the lower end of their $57.8-72.2m (£40-£50m) guidance. The company anticipates a negative working capital adjustment resulting in net proceeds before costs to be approximately $43.3m (£30m).
The statement notes that underlying cash generation in the retained business remains strong. However, it continues, higher than anticipated pre-sale losses in Dairies, the resultant impact on the sale proceeds and the $8.7m (£6m) acquisition of Promovita shares will impact reported levels of net debt at the year end.
Outlook within expectations
Mark Allen, chief executive of Dairy Crest, said, “Dairy Crest is now a branded and added-value business well placed to achieve profitable and sustainable growth.
“The strength of our brands is demonstrated by their performance in a challenging, deflationary consumer environment. We are also entering an exciting new chapter for Dairy Crest. Our functional ingredients business will be a key part of Dairy Crest in the future, giving us access to new growth markets.
“The outlook for the full year remains in line with our expectations.”