Dairy Crest churns out 871% jump in half year profits
Excluding exceptional items adjusted pre-tax profits still rose 8%
Dairy Crest has recorded a giant 871% increase in first half profits, having eliminated its pension deficit and milked returns from its Cathedral City cheeses which helped offset record cream costs.
Pre-tax profits for the six months to September 30 soared to £151.4 million, up from £15.6 million a year earlier, with the company having since changed the way it calculates pension payouts, linking its scheme to the Consumer Price Index (CPI) rather than the UK’s Retail Price Index (RPI).
It resulted in exceptional income of £132.4 million for the period.
Excluding exceptional items, adjusted pre-tax profits still rose 8% to £20.6 million, on a 16% jump in revenues to £220.1 million.
Chief executive Mark Allen said it was an “encouraging first half”, cheering performance of the company’s oil and spread brands, Clover and Frylight , which experienced volume growth of 2% and 10% respectively.
Cathedral City cheese also emerged as a winner in the first half of the year, with volumes rising 10%.
“Cathedral City, the nation’s favourite cheese, continues to go from strength to strength and has produced exceptional growth over the period,” Mr Allen said.
“We have delivered good profit growth despite a record high cream price, which has a temporary but significant impact on input costs in our butter and spreads business.”
The company’s butters business is facing “significant” cost pressures due to surging cream prices which rose to nearly £3 per litre by the end of September, marking a 65% increase in wholesale prices from a year earlier.
Dairy Crest has since cut back on promotional sales of its Country Life butter products in order to protect margins. But that move has not come without compromise, as sales volumes dropped 14%.
“We expect the cream price to remain high for the second half of the year and we will continue to manage our butters business accordingly,” Dairy Crest said.
The company has also steadily increased the price it pays for milk amid climbing fat costs, with price hikes in September, October and November.
Fats costs have risen as a result of consumer demand – as preference for butter has increased – combined with lower milk supplies.
Last week, Dairy Crest against raised the amount it pays to Davidstow farmers by a further 0.5p per litre to 32p per litre.
Dairy Crest Group procurement director Chris Thomson said: “Even though dairy prices are beginning to steady again, we wanted our farmers to receive the benefits of the recent all-time high, particularly as we go into the more challenging winter months.”
“We remain committed, as ever, to supporting our farmers and paying them a fair price for the high quality milk they supply to us.”