Lower prices=big profits for dairy companies

By Robert Harris

FALLING milk prices, which have pushed many milk producers into the red, helped the big dairy companies post substantial profit rises last year.

Express Dairies, which demerged from Northern Foods in March, announced a 40% rise in operating profits to £62.5 million, mainly due to the strong Pound driving down raw milk costs.

The firm said the rise was exaggerated by comparing with the poor previous year, but the figure is still slightly ahead of the £60.8m achieved in 1995/96.

Express, the UKs largest supplier of milk and cream, withdrew from unprofitable supply to smaller supermarkets, concentrating on larger retailers and doorstep deliveries.

Retail prices, especially of doorstep milk, remained steady and the 7% fall in sales was less than expected.

Northern Foods, which now concentrates on high added-value products, including the Eden Vale dairy brands, raised operating profit by 8% to £104m.

Unigate increased overall operating profit by 11.7% to £138.9m in the year to March, helped by a turnaround in its dairy division performance.

Profits in this commodity sector increased for the first time since deregulation, up 17.4% to £40.5m, despite price pressure from supermarkets.

“Contributing factors were lower raw material costs, tight cost control and firmer butter and milk powder prices,” said chief executive, Sir Ross Buckland.

Unigates fresh foods division, including added value products like yogurt, cheese and spreads, raised profits 10.7% to £73.5m.

After the collapse of the proposed Hillsdown merger, Sir Ross said acquisitions of other food businesses remain firmly on Unigates agenda.The company ended the latest trading period with £231m in cash.

Express Dairies hoped for some form of consolidation in the next 12 months, said chief executive Neil Davidson.

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