Continuing increases in the cost of production have dented profitability at dairy supplier Yeo Valley.
The company saw sales rise by £2.5m to £294.6m for the year to 27 May 2018, according to group accounts filed with Companies House. But soaring raw material and packaging costs meant the cost of sales also rose by £17.8m (or 9%) to £218.1m.
Profit before tax rose by £0.9m to £9.4m, however, this was largely down to gains from a property revaluation of £8.6m. Meanwhile, profit margin fell from 3.6% the previous financial year to 3.2%. This also fell short of Yeo Valley’s margin target of 5%.
The 2017/2018 financial year – the last before Yeo’s sale of its milk business to Arla is taken into consideration – had seen a continuation of the two main drivers in the company’s rising cost of production, suggested executive chairman Adrian Carne.
During the accounting period, the UK milk price had continued to rise, while the continuing weak position of the pound due to Brexit uncertainty had also led to big increases in fruit and packaging costs, he added.
While milk price increases in particular were “welcome in the longer term, to ensure we have a viable UK dairy farming sector, such persistent increases will impact on profitability”, Carne admitted.
He warned of further volatility during the current financial year, particularly over increasing input costs. However, he stressed the business was well placed to manage this volatility, and had delivered a credible performance in a “highly competitive market”.
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