Dairy Crest has plunged to a £10m loss after writing down the value of its dairies business.

The company announced this morning it had decided to take a £81.7m exceptional charge against the division for the year to 31 March.

As a result, it fell to a £10.1m loss for the full year, down from profits of £77.8m for the previous 12 months.

Amid a challenging market environment, the dairies business had not achieved an “acceptable level of profitability,” chief executive Mark Allen admitted in his review of the company’s performance.

“On top of downward pressure on selling prices in a tough consumer environment and an extremely competitive middle ground, the whole sector suffered from steeply falling dairy commodity markets,” he said. “Reduced retail selling prices in supermarkets have also put pressure on our residential sales volumes.”

Those issues offset an improved performance in the second half, including increased sales of new milk products such as Frijj The Incredible and milk bags, Allen said.

“Since the year-end, we have continued to act decisively to protect the future of our dairies business and have announced a series of initiatives to restore this business to a satisfactory level of profitability,” he said.

Moves included the planned closure of dairies in Aintree and Fenstanton, an increase in “some” selling prices and a cut in head-office jobs, as well as a cut in the price paid Dairy Crest pays to its farmers.

Revenue in Dairy Crest’s dairy division stood at £1.07bn million for the year, down 2% year-on-year, with profit down to £10.2m from £27.1m and margins down to 1% from 2.5% in 2011.

Across all its business divisions, revenue stood at £1.63bn, up 2% year-on-year. When taking the exceptional charge as well as pension interest out of the equation, profits were largely flat year-on-year at £87.4m, down fractionally from £87.6m in 2011.

Sales of Dairy Crest’s five key brands – Cathedral City, Country Life, Clover, St Hubert and Frijj – rose by 11% year-on-year, with Cathedral City delivering 12% growth. Sales of Country Life fell by 1% year-on-year compared with total market growth of 12%

The company said its strategic review of its French spreads business was ongoing.

Topics