Dairy Crest (DCG) has reported a 5% fall in revenues from continuing operations and a 13% fall in pre-tax profits for the six months to 30 September.
Interim results for the period revealed a year-on-year drop in revenues from £215.3m to £203.8m, reflecting lower selling prices on products across the business and a slowdown in its butter and spreads business – with Country Life butter value sales falling by 15% and Clover by 17%.
However, Dairy Crest reported strong first-half sales for flagship cheese brand Cathedral City (up 7%) and for its Frylight oils business (up 37%).
Overall, pre-tax profits fell from £15m to £13.1m for the period, which contributed to the 1.3% fall in the share price to 635.9p.
CEO Mark Allen remained bullish over the future of the business, particularly after the £80m sale of its liquid milk business (which lost £16.7m) to Müller .
“The sale of our dairies operations leaves Dairy Crest well positioned for long-term, profitable and sustainable growth alongside strong cash generation,” he said. “Following the sale, Dairy Crest will be a predominantly branded, simpler, more focused business with a significantly reduced overhead base.”
Allen predicted future sales of ingredients for infant formula, which will start in the second half, “will provide added impetus,” while lower cheese costs and an improved performance from its spreads and butters business in the second half meant Dairy Crest’s full-year expectations remain unchanged.
With the disposal of the milk business near completion, analyst Clive Black of Shore Capital said Dairy Crest should approach 2016 “with an expectation that it may be a highly sought after proposition”.
He reiterated Shore Capital’s ‘Buy’ recommendation, adding it would be a case of ‘when’ Dairy Crest was approached and not ‘if’.
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