UK-based Dairy Crest has said that its key cheese and butter brands, including Cathedral City, Clover, Country Life and Frylight, continue to show strong volume and value growth.
The company has posted a trading update for the first six months of the year, ending 30 September 2017, ahead of its interim results, which will be announced on 9 November.
The update highlights that the combined volumes of the four key brands are expected to be ahead of last year, while Cathedral City cheese, in particular, is expected to deliver double-digit volume growth.
However, as a result of higher cream prices affecting its butter business, Dairy Crest has reduced its promotional activity for Country Life butter, which has impacted sales volumes.
"Cathedral City has had a strong first half of the year, delivering good volume and value growth and strengthening its position as the nation's favourite cheese," said Dairy Crest CEO Mark Allen.
"This performance has more than offset the impact of further input cost inflation in the butter business."
Pension Fund
In September, the group announced that the 2016 actuarial valuation for the Dairy Crest Group Pension Fund has been agreed and now incorporates a change in indexation from RPI to CPI.
This change in indexation will result in an 'exceptional gain' in 2017/2018, which is estimated to be approximately £125 million.
The company describes this as an 'important development', which will significantly reduce future funding liabilities.
Financial Outlook
"Overall, first half profits are expected to be ahead of last year," said Allen. "Our profit expectations for the full year are unchanged despite input costs remaining high."
The company is anticipating that net debt will be higher than at the year-end in March 2017, as the first half is characterised by increased stock levels due to the seasonality of milk supply.
"The strength of our brands and focus on quality, innovation and efficiencies mean that we remain well positioned to deal with market conditions," added Allen. "We continue to focus on cash generation and on reducing net debt in the full year."
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.
