DAIRY CREST is calling time on a loss-making part of its joint venture with Yoplait by closing a factory in Yeovil, Somerset, that makes dairy desserts.

It has been haemorrhaging an estimated £2m per year, despite clocking up annual sales of own-brand desserts to supermarkets of £25m.

But the closure will have “no effect” on Dairy Crest‘s dairy farmers, because the factory only buys cream, not milk.

“Yoplait Dairy Crest has decided to focus its future activities on the development of branded products, such as Petits Filous, Frubes and Yop, which continue to show good growth.

“Own label is still very important to us. We have significant own-label production in the milk and cheese sectors, and we‘re not pulling out,” a spokeswoman said.

YDC had branded sales of £141m in 2003, and the company believes that growth in this sector is the best way to boost milk prices.

Farmers supplying its Davidstow super-dairy receive a premium of around 0.5p/litre on milk going into Cathedral City rather than own-label cheese.

Production will continue in Yeovil until June, bringing a close to almost seven years under the Yoplait Dairy Crest banner. Two hundred and sixty jobs will be lost.

Supplies went mainly to Tesco, with product also going to Asda, Waitrose and the Co-op. Production will shift to Uniq‘s Minsterley dairy.

The closure will land DC with £1.5m exceptional costs in this financial year, but will add to profitability in the following year, according to analysts at ABN Amro.

The City bank has upped its profits forecast for YDC in 2006 to £76m, and changed the share price target from 360p to 430p. The price was up at 427p on Jan 13.