Dairy Crest to shake up liquid milk division

UK integrated dairy business Dairy Crest has warned that profits in its key dairies division continue to remain under pressure and said that it is evaluating a range of options to restore operations to a satisfactory level of profitability.

Sources close to the business have however ruled out the sale of the division, which sells fresh and flavoured milk to retailers, coffee shops and residential customers.

The company said that the fourth-quarter trading has been in line with its expectations as a result of strong performance of its key brands and cost-cutting measures.

This year, the company expects strong growth in its foods division, which offers branded cheese and spreads, to compensate the weak performance of the dairies division.

According to the company, the sales of its five key brands, including Cathedral City, Country Life, St Hubert Omega 3, Clover and Frijj, have increased during the year.

Although the sales of the brands fell during the first half of the year due to the tough economic climate, the company managed to push up prices and expects total sales to be higher this year compared to the previous year, owing to the strong performance in the second half.

The company has also seen increased sales through its doorstep delivery internet channel milk&more.

Dairy Crest chief executive Mark Allen said that this has been a year of progress for the company, despite challenging trading conditions.

"Our business has faced sizeable inflationary input costs and we have dealt with these by focusing on our strong key brands and by driving efficiencies," Allen added.

The company said that its cost reduction programme, which aims to deliver annual savings of £20m, is on course, and has partially offset higher input costs including milk.

It plans to focus on lowering costs into the new financial year and expects to achieve a similar level of annual savings.

Earlier this month, the company said that it was looking to divest its French spreads business St Hubert, which is expected to fetch nearly £300m.