14 June 1996

Dairy companies return profits to reverse trend

TWO of the countrys leading dairy companies have reported increased profits for the year to Mar 31, reversing the massive profit falls seen last year due to restructuring costs.

Unigate this week announced a 7.5% increase, before tax and exceptional items, to £125.3m. And Northern Foods managed a 4.1% rise to a similar £124.2m.

Turnover at Unigate was up 12.7% on the year to £2134m, while Northern experienced a slight fall in sales to £1947m.

Unigate, meanwhile, enjoyed an exceptional gain of £173.7m from business disposals, including the firms US restaurant chains. This gives it a considerable "war chest" for further expansion, with Europe the target area.

The companys fresh foods business increased its operating profit by 49% to over £49m with strong performances from St Ivel and yellow fat spreads.

Chief executive Ross Buckland added that the profitability of cheese, butter and milk powder had also improved, but he warned that this was unlikely to continue with the slump in world prices.

Profits in the liquid milk business had again fallen, down 7.9% to £35m on a turnover down 1.9% to £466m. "The fall was in line with expectations and reflected the continuing pressure exerted by the rising cost of milk and the switch in sales from the doorstep to the supermarket," Mr Buckland said.

He again attacked Milk Marques selling system. "The high cost of milk remains of concern to us. Milk costs ought to have fallen given the decline in world market prices for butter and powder. This has not been the case, indeed Milk Marques prices rose on Apr 1, 1996, rather than falling in line with the market."

This theme was taken up with avengence by Northern Foods chairman Chris Haskins. "Weakness in commodity prices is affecting profits and has not been reflected in ex-farm milk prices. This situation must be corrected," he said, calling for a "satisfactory and long-term resolution to the UK milk buying problem". &#42