Dairy Crest To Pay More For Milk

UK - Dairy Crest announces a 1.85 pence per litre increase in price paid to farmers, to reflect higher costs.
calendar icon 19 September 2011
clock icon 2 minute read

The announcement was made in Dairy Crest's pre-close trading update for the six months ending 30 September 2011.

Dairy Crest stated that its successful dairies business has led to the continued growth of milk sales to major retailers and has maintained milk&more sales at over £1million a week.

However, as identified earlier in the year, strong competition in retail milk markets has led to lower residential milk sales.

In response to this, Dairy Crest has agreed to increase the price paid to farmers who supply the dairies business by 1.85 pence per litre from 1 October 2011, in order to reflect their higher costs.

These include new bonuses for enhanced milk quality to further encourage the focus on milk quality and animal welfare.

To offset the impact of the increase, Dairy Crest is in the process of negotiating selling price increases.

The trading update also highlights that Dairy Crest's trading in the first half of the year has been consistant with expectations.

Operational efficiencies and selling price increases have broadly offset higher input costs and higher property profits are expected to result in overall profits for the first half, being slightly ahead of the same period last year.

Dairy Creast's use of a successful strategy has continued to build added value sales and make efficiency improvements across the business.

Despite pressure on consumers' disposable incomes, sales of Dairy Crest's five key brands (Cathedral City, Country Life, Clover, St Hubert Omega 3 and Frijj) have continued to increase, although the volumes of these brands will be lower than in the same period last year.

Innovation remains an important part of Dairy Crest's strategy, leading to the introduction of four new products during the period.

The UK has seen the launch of 'Chedds', a range of three new children's cheese snacks and 'The Incredible', three new premium flavours of milk shake, Frijj.

In France, Dairy Crest has launched a new St Hubert non-dairy cream and is set to launch a new spread that contains seeds.

Dairy Crest also reported that 30 September net borrowings will be higher than a year ago, as anticipated, reflecting higher cheese stocks, increased capital investment and the purchase of M H Foods.

Mark Allen, Dairy Crest Chief Executive, said: "We are pleased that we continue to perform as expected in this tough environment. In the first half our broad base, high quality brands and ongoing cost saving measures have allowed us to balance the conflicting demands of increased input costs and subdued consumer spending. At the same time we are investing for the future, with new products and upgraded facilities."

"Overall we remain confident of delivering full year profits in line with our expectations," he concluded.

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