Dairy Crest profits as cheesy feats offset higher cream costs
Dairy Crest Group reported cheese sales volumes and values in the six months to September are ahead of last year, with profit also increased.
Dairy Crest Group
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16:34 12/04/19
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Cathedral City cheese is expected to materially outperform the UK cheese market with double-digit sales volume growth, while the other three of its quartet of key brands are delivering "strong" volume growth, with growth in value expected to be higher for all four.
In the first quarter of the year the four had recorded 7% volume growth, with Cathedral City up 15%.
Profit for the first half is expected to be ahead of the same period last year, with management's expectations for the full year remaining unchanged, taking into account the effect of higher cream prices on the butter business.
Also, there will be a one-off £125m exceptional gain from the actuarial valuation of the Dairy Crest Group Pension Fund.
The new demineralised whey and galacto-oligosaccharide business has made "good progress" in developing its customer base with the help of partner Fonterra.
Dairy Crest expects to start to benefit from this in the second half of the year.
Chief executive Mark Allen said the performance of Cathedral City "has more than offset the impact of further input cost inflation in the butter business" and stressed that profit expectations for the full year were unchanged despite input costs remaining high.
"The strength of our brands and focus on quality, innovation and efficiencies mean that we remain well positioned to deal with market conditions.
"We continue to focus on cash generation and on reducing net debt in the full year. The agreement reached with the trustee of the pension fund is an important development and significantly reduces future funding liabilities."
Dairy Crest shares rose in early trading but by 0900 BST were pretty much unchanged at 608p, up from the 540p it hit in July but still some way off a high of 686p around a year ago.
House broker Shore Capital is looking for pre-tax profit of £64.5m, earnings per share of 37.0p and a fall in leverage from 2.8 times to 2.5 EBITDA.