Investors in Cathedral City owner Dairy Crest will be pleased to see that the dairy firm is "not sitting on its laurels" ahead of potential supply chain challenges caused by Brexit, a leading analyst has suggested.
Russ Mould, investment director at AJ Bell, was commenting following the publication of a pre-close trading statement by the business, in which it said that it expected half year revenues and profits to be up on the same period last year.
Strong Brand
“The value of a strong brand is reflected in today’s robust first half trading update from food producer Dairy Crest," Mould said.
“Despite the tough like-for-like comparison with 12 months ago, the company says this part of the business delivered ‘good’ growth, which translates in the eyes of most observers to a mid-to-high single digit advance in percentage terms.
Mould did note that Dairy Crest was among the businesses to be affected by the changeable weather this year, with its Frylight cooking oil seeing reduced demand during the summer months. It has also responded well to high butter prices "by scaling back promotion for its Country Life range which is hurting sales for this part of the business.
“A fundraise earlier this year supported an improvement in the balance sheet and the company is investing both in cheese production capacity and product development.
“Investors will be pleased to see the company is not sitting on its laurels as it looks to navigate any complications to its supply chain from Brexit.”
Good Position
Elsewhere, Darren Shirley of Shore Capital Stockbrokers said that he believed Dairy Crest was now "well positioned to drive medium to long-term growth across its high quality cheese operations", anticipating growth of around 6% for the Cathedral City business in the first half.
Shirley also noted that the business continues to innovate in order to drive market share, with the launch of a new lactose-free Cathedral City variant and a Clover Light variant likely to boost the business in the coming half. Its Functional Ingredients arm is also growing 'in line' with expectations, which is similarly positive for the outlook.
"With the £68.5m inflow from the Q1 capital raise providing for a materially stronger balance sheet and great flexibility, we believe Dairy Crest is now well placed to drive medium to long-term growth across its high quality cheese operations, whilst realising the potential from the investment in Functional Ingredients." Shirley said.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
