Dairy Crest First Half Profit Seen Higher

Dairy Crest (DCG.L), a British producer of cheese, butter and spreads, said on Monday that it expects profit in the first half of its fiscal year to be ahead of the prior-year period’s after strong performance at its Cathedral Cheese brand helped to offset further input cost inflation in the butter business.

The combined volumes of its four key brands – which include Clover, Country Life and Frylight – are expected to be ahead of last year, according to a statement released by the company, and the combined value growth of the brands is also expected to be higher than volume growth. Cathedral City is expected to deliver double-digit volume growth in the first half, the company added.

In July, Dairy Crest cut the promotional activity on its flagship butter brand, Country Life, saying at that time that higher cream prices had crimped margins in the company’s butter business in its fiscal first quarter. In Monday’s statement, the company said that the reduced promotional business on Country Life had impacted sales volumes, while partly mitigated the adverse impact on margins.

Prices of butter, cheese and skim milk powder products have been advancing globally due to limited export availability of dairy products in major producing countries, analysis published by the United Nations’ Food and Agriculture Organisation (FAO) this month has indicated.

The FAO’s Dairy Price Index averaged 219.7 points in August, up 3.1 points, or 1.4% from July. Although at that level the index exceeded its year-earlier value by 65 points, or 42%, it still stood 20% below the peak reached in February 2014. Butter and Whole Milk Powder prices rose in August due to reduced export availability resulting from greater domestic demand for butterfat in Europe and North America, according to the FAO.

Dairy Crest said that it was also making good progress with its New Zealand dairy partner Fonterra in developing the customer base for its de-mineralised whey and galacto-oligosaccharide, saying that it would start to benefit from this in the second half of the year.

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