Dairy Crest warning

Nov 11 2008 by Peter McCusker, The Journal

COUNTRY Life butter firm Dairy Crest has warned annual profits will be 10% down on last year due to higher milk costs and the economic slump.

The firm, which saw “double digit” sales growth for Cathedral City cheese and Country Life in the first half, described conditions as increasingly tough.

Adjusted pre-tax profits for the six months to September 30 increased 4% to £38.5m while revenue rose 6% to £808m.

The figures were in line with expectations, but shares tumbled 20% as investors reacted to the reduced profits guidance from the company.

Investec Securities analyst Nicola Mallard said: “Although the group says it is not seeing a big move from brands to own label, it is seeing an increase in sales on promotion, which impacts margins.”

The foods division achieved a 47% increase in underlying profits to £46.7m on revenues of £304m in the half year. Dairies business profits were down to £2.7m from £13.5m, reflecting higher input costs and weaker returns in dairy ingredients markets.