Dairy Crest profits soar despite spike in cream price
Dairy Crest, which has its innovation centre at Harper Adams University, saw its profits soar in the six months to the end of September.
Adjusted pre-tax profits rose by eight per cent to £20.6 million over the period, despite it having to tackle spiralling cream prices.
The figure was on the back of improved sales of £220.1 million – 16 per cent ahead of the same time last year.
Chief executive Mark Allen said: "We have had an encouraging first half, with Cathedral City, Clover and Frylight delivering good growth in both volumes and value.
"We have delivered good profit growth despite a record high cream price, which has a temporary but significant impact on input costs in our butter and spreads business."
Dairy Crest, which closed its former Crudgington creamery site near Telford in 2015, saw Cathedral City cheese volume sales growth of 10 per cent in the half year.
Following the closure of Crudgington, Dairy Crest consolidated its butters and spreads production into Kirkby on Merseyside.
It then opened a new £4 million innovation centre at Harper Adams where a team of about 40 staff work on new products, including coconut and avocado cooking sprays.
Mr Allen added that the company expects cream prices to remain high over the rest of the year – which would be good news for dairy farmers, even if it squeezes Dairy Crest's margins.
“Our strong brands and the quality and efficiency of our operating facilities mean that we are well positioned to grow," he said.
"While we expect butter input costs to continue to be challenging for the remainder of the year, we are confident in delivering our full year expectations.”
A reduction in pensions liabilities meant that the company booked pre-tax profits of £151.4 million – 871 per cent ahead of the previous year.
The reduction in liabilities resulted from the change in the indexation benchmark for pensions.
The group paid pension contributions of £8.3m in the first half of the year out of the total £10m cost contribution for the full year agreed with the pension trustee.
At the end of September it had a pension surplus of £39.9m compared with a deficit of £120.5m a year before.
The new schedule of pension contributions will see cash contributions by the group of £15m in 2018-2019 and beyond that, contributions will revert to £20m a year.
