Unigate buy boosts Dairy Crest

By FWi staff

DAIRY Crest has reported a big increase in profits following its acquisition of Unigates dairy and cheese business last year.

Adjusted pre-tax profits rose by 29% to 57 million for the year to 31 March, 2001, from sales which climbed 65% to 1.3billion.

The latest figures include nine months of combined trading following the Unigate purchase, which accounts for much of the rise.

“Dairy Crest is now a whole new company, transformed by the Unigate acquisition,” said chief executive John Houliston.

“The increase in profit before tax is ahead of market expectation, and should get a good reception.”

Earnings per share also jumped sharply, up 22% to 35.4p, and directors recommended a final dividend of 9.6p, taking the total for the year to 14.1p, up 8%.

That means a farmer with a typical holding of 2500 shares will receive a further 240, taking the total dividend to 352 for the 12-month period.

But, for a 700,000 litre producer, that represents just 0.05ppl. Not surprisingly, many farmers have made it clear that a good milk price, not only share dividends, is needed to sustain their businesses.

Direct milk supply representatives, who are pushing farmers to join co-ops, claim 25-30% of the 2000 Dairy Crest direct suppliers have given the company notice to quit, following dissatisfaction with the companys raw milk pricing policy.

But, said Mr Houliston, with most on an average notice period of 12 months, that only represented about 100 farmers in the current financial year.

And at least 30 of those had already changed their minds and decided to stay, he maintained.

“I understand the political mood at this time. But we need to separate emotion and rhetoric coming from some camps from other, very canny farmers who are looking to the long-term.

“They recognise the benefits of being part of a broad-based dairy company that can stand up and match the retailers, with the financial width to invest in world class plants and operations; to enable investment in a portfolio of brands that will return a proper price for their milk,” said Mr Houliston.

“We return to farmers what we get from the various markets.”

Consumer Foods sales, which includes spreads, cheese, fresh dairy products and supermarket liquid milk, increased by 59% to 785m, and operating profit rose by a quarter to 40.8m.

Star performers were Cathedral City and Davidstow Cheddar cheeses, whose combined sales volume climbed by 20%.

Turnover in Food Services, including doorstep milk and commodity ingredients, increased by 74%, to 522m, and operating profit more than doubled to 33m.

Synergies from the Unigate acquisition, worth 11m in 2001/02, were on target, said Mr Houliston.

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