Dairy Crest efficiencies soured by high milk prices

25 May 2012

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26 May 2012 | Kamalpreet Badasha

Supply chain efficiencies helped raise profit at Dairy Crest's cheese division to £35.5 million last year, but this could not prevent the producer making an overall loss of £10.2 million.

The company reported a £16.9 million loss in its dairy section – which is separate from the cheese division - largely due to inflated milk prices. But the rising milk costs did not affect its cheese brands, particularly Cathedral City, due to the maturation time. As milk was bought earlier in the year when prices were low and sold as cheese later in the year. The present high milk prices have not affected its profit margin.

Cathedral City is made in Cornwall from milk supplied by around 400 local dairy farmers. The company reduced the weight of cheese per pack, but increased the overall tonnage of cheese sold by 5 per cent.

Dairy Crest reported its costs have increased to £80 million. The impact of this was counteracted by cost savings of £22 million. The savings were made by implementing supply chain efficiencies such as making packaging uniform across all of its spread brands. Other measures included depot closures and job cuts.

Dairy Crest chief executive Mark Allen said in a statement: “We have maintained adjusted group profits despite facing inflationary cost pressures of around £80 million this year by making annualised cost savings of around £22 million and achieving selling price increases.

This has been made possible by a programme of consistent investment in developing our key brands and building a modern, efficient supply chain.”

Revenue for the dairy arm of the business was down by £20.8 million. Revenue for spreads was £43.2 million and £6.5 million for cheese.

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