'Strong performance' from Dairy Crest but 'efficiency savings' on the horizon
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In a report on the nine months ended 31 December, leading dairy products group Dairy Crest yesterday (2 February) reported "a strong performance" in the last three months with profits ahead of expectations. However, the company said that at its Kirkby spreads factory it had "identified potential efficiency savings and are in consultation with employees to reduce our cost base", suggesting that job losses may be on its agenda.
This strong performance had been achieved through a strategy of delivering growth by investing in the group's brands, controlling costs and generating cash, it said.
As had been anticipated, sales for the nine months ended 31 December 2009, were down 1% on the corresponding period last year due to lower sales of commodity ingredients and milk to non-major retail customers. However, sales had grown in three key areas: the group's five key brands (Cathedral City, Country Life, St Hubert Omega 3, Clover and Frijj), sales of milk to supermarkets including a renewed Sainsbury's contract, and Dairy Crest's doorstep delivery internet proposition which now has over 180,000 customers registered to use the service.
The company said cost control remained a key part of its strategy and it continued to seek cost reductions. For example, it has recently redesigned some spreads tubs to reduce packaging costs and had completed the closure of the glass bottling operation at the Fenstanton dairy. At the Kirkby spreads factory, the company said: "We have identified potential efficiency savings and are in consultation with employees to reduce our cost base."
Chief executive Mark Allen (pictured) said: "We are encouraged by the strong progress we have made so far this year and anticipate that we will maintain our momentum into the fourth quarter. Over the last two years our five key brands … have grown by 39%. We will continue to focus on the strategy that has helped us deliver this success. Cash generation remains key and we have identified opportunities to continue the drive that has delivered a significant reduction in our net debt. Looking forward, the increased investment in our liquid milk dairies will allow us to drive further cost efficiencies, remain competitive and maintain high levels of service to our customers. We remain cautious about the trading environment for 2010 but the improvements we have made to our business during 2009 leave us well positioned to cope with the challenges."
