22 November 1996

Milk profits pressured

INTERIM results from dairyings two biggest players, Unigate and Northern Foods, illustrate the continuing pressure felt by buyers.

Unigate published its results on Tuesday (Nov 19) showing dairy profits down 14% to £17.6m. Lower returns from world butter and skimmed milk powder markets lost the company £4m in the six months to Sept 30.

Liquid milk sales also fell another 7%, as lower doorstep deliveries were not offset in retailers chill cabinets. But the company did complete its 40% rationalisation of bottling capacity, leading to better cost control.

Problems in the dairy sector were offset by 29% profit growth in Fresh Foods to £26.5m, in no small part due to the expansion of Malton Bacon and the summer acquisition of Krafts margarine and spreads division. Total group profit at Unigate increased 7% to £59m on sales of £1.19bn.

Northern Foods six-month results on Wednesday (Nov 20) told a similar story.

Dairying suffered a 27% profit slump to £21.6m, for the same reasons. Gains in liquid sales to the supermarkets also slowed as the market matured.

But there are one or two more optimistic signs, with both companies now benefiting from slightly reduced milk costs and both reporting a slowing down in the rate of decline in doorstep deliveries.n