Dairy Crest posts 11% profit rise

DAIRY CREST has recorded an 11% rise in underlying profits for the year to the end of March.

After stripping out exceptional items and goodwill to allow for direct comparison with previous years, adjusted pre-tax profits rose to £85.1m, up from £76.8m the previous year. Sales rose 3% to £1.36bn.

Earnings per share, adjusted in the same manner, climbed 8% to 50p.

Over the same period, the company cut its debt by £65m to £279.7m.

The board has recommended a final dividend of 13.4p/share, taking the overall payment per share for the year to 18.9p, up 15% on the year.

Consumer Foods, the added value end of Dairy Crest‘s operations, saw sales increase by 8% to £880m and recorded a strong adjusted operating margin of 8.2%.

The spreads business was biggest contributor to profit following the integration of St Ivel brands.

But cheese sales fell below expectations, with Cathedral City, one of the firm‘s past star performers, growing just 1%.

Dairy Crest kept the brand‘s price higher than its competitors in the third quarter, and its report suggests advertising spend was too low to maintain sales.

The company said cheese prices were firm, and industry cheese stocks were at a three-year low which should help performance in the current year.

But, with uncertainty over CAP reform which could lead to uncertainty over commodity pricing, it expected margins to remain flat.

Turnover in the Food Services division – doorstep and food ingredients – slipped 6% to £481.5, mainly reflecting the closure of the Chard Butter powder plant.

But adjusted operating margin still hit 6.8%, reflecting, the company says, strong markets for butter and skimmed milk powder.

The closure of Chard, as well as Kidlington, cost the company almost £20m.

All told, exceptional costs and goodwill amortisation cost £39.5m, producing an actual pre-tax profit of £45.6m (£47.8m in 2003).