Dairy Crest profits up 9% as dairy division slumps

Dairy Crest’s pre-tax profits rose by 9% in the half year to the end of September, to £39.2m, but “an extremely challenging period” in the dairies division saw profits here slump from £10.9m to £1.2m.

Strong performance in the cheese and spreads divisions offset the lower profits in the dairies division, said the company. Overall turnover rose by 2%, with sales of the group’s key brands growing by 5% compared with the first half of the year.

The need to pay farmers a higher price, coupled with fierce retail price competition had put pressure on profits throughout the liquid milk supply chain, said the company, which is currently paying producers 15% more for milk than in November 2010.

Overall sales through Dairy Crest’s milk&more online home delivery service are up 50% on a year ago and liquid milk sales to major retailers rose in the six months to the end of September.

However, milk volumes delivered to residential addresses through milk&more fell by 12% in the six-month period, hit by lower supermarket prices.

There was a clear plan to increase profits from this division in the second half of the year by reducing costs and growing added value sales, said Dairy Crest, which is on track with a three-year £75m capital investment programme for its liquid milk dairies.

Adjustments for property sales income through depot rationalisation takes profit before tax up by £4.6m to £43.7m.