Dairy Crest sets dividend after good first half

By Robert Harris

FARMER shareholders in Dairy Crest will receive almost £100 following the firms announcement this week of an interim dividend of 3.85p a share following a good first half performance.

The figures showed overall profit before tax up 11% on the same period last year to £20.7 million, slightly ahead of City forecasts.

Unusually, it was the food services division, which includes commodity ingredients (butter and skim milk powder) and household milk sales, that posted the biggest gain in profits. This was despite a £22m fall in turnover which reflected lower milk costs. Operating profit rose 28% to £6.9m, compared with a 5% rise to £15.4m in the added value consumer foods division.

This marks the first significant rise in the commodity sector for over two years. But finance director Ian Laurie denied the company was reaping the benefits of a lower raw milk price, which has fallen 3p over the year.

“Any savings in raw milk purchased for bulk cheese or supermarket milk sales are passed directly on to the customer,” he said.

• Doorstep milk deliveries were the main reason for the sectors strong performance was an increase in doorstep milk deliveries, bucking the national trend which showed an 8% decline, says chief executive John Houliston.
• Anglia Dairies, Dairy Crests acquisition last year, boosted volumes by 4%.

There was no future in hiking milk prices to create a false market, he stressed. Milk Marque was trying to do just that, currently by shipping raw milk abroad for processing, and in the future by operating a butter/skim milk powder plant in Devon. “It is trying to rig the market, by taking supplies off the market that could have otherwise gone to added value products.”

That could only weaken the UK dairy industry, at a time when it needed to strengthen to prepare for global competition, he added.

• Added value products accounted for almost 70% of Dairy Crests operating profit, at £15.4m. Turnover increased slightly to £239m.
• Mature cheddar was one star performer, sales of which increased 7%, well ahead of the national 2% growth, said Mr Houliston. Davidstow showed the largest climb at 10%.
• Clover retained its position as market leader, taking 29% of national dairy spreads sales.
• Yoplait Dairy Crest brands like Frubes and Wildlife also generated strong growth.
• Earnings per share rose 12% to 13.2p.