Dairy Crest up 28% as disposals reduce costs

DAIRY CREST, the food manufacturing arm of the Milk Marketing Board planning to float next spring, has lifted profits 28 per cent.

Taxable profits were pounds 17m, up from pounds 13.3m for the six months to 30 September, helped by lower interest charges. Disposals have cut debt from pounds 70m to pounds 7m and gearing to 3 per cent. Operating profit rose 14 per cent.

The expansion in trading was led by DC's consumer foods division, supplying milk, yoghurt and cheese to supermarkets, in the teeth of stiff pricing pressure from customers.

Sales of consumer foods rose 18 per cent to pounds 156m, trading profits were 40 per cent ahead at pounds 9.2m, and the operating profit margin widened from 5 to 5.8 per cent.

John Houliston, chief executive, said: 'We have not contributed to the price wars being waged by supermarkets.'

However, on milk, where price competition has been particularly keen, he added: 'We are not happy with the margins achieved from the supermarkets and clearly need a better price.'

DC had to absorb a 12 per cent increase in the price of milk - resulting from increased demand while production stayed static.

But Mr Houliston added: 'Up to now supermarkets have been cutting prices at the expense of food manufacturers' margins. Now they will have to shave their own.'

The company indicated that cheese, yoghurt and other non- milk products provided most of the profit and margin improvement for the consumer foods division.

Profits fell from food services that include doorstep deliveries of milk and supply of dairy-based ingredients to other food companies such as Cadbury Schweppes and United Biscuits.

Mr Houliston said only half of domestic milk consumption was delivered; supermarkets had eroded the share from 90 per cent.

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