JPMorgan downgrades Dairy Crest to 'neutral'

JPMorgan Cazenove downgraded Dairy Crest to ‘neutral’ from ‘overweight’ as the stock has surpassed its 600p price target.

The bank said Dairy Crest’s results on Thursday showed the group achieved positive volume growth in its key brands in the first half, despite a decline in the flagship Cathedral City cheese brand.

“This was achieved against a deflationary backdrop and with some operational teething problems in functional ingredients,” JPM said.

It cut its pre-tax profit estimate for full-year 2017 by 2% to £61.5m to reflect a reduced contribution from functional ingredients. However, it lifted its forecast for FY18 by 1% to £68.4m to reflect increased margin expectations.

Dairy Crest said on Thursday that adjusted pre-tax profit in the first half rose 19% to £19.1m as the group underwent a restructuring.

Revenue fell 7% to £190m in the six months ended 30 September, reflecting deflationary pressures in its markets.

At 0840 GMT, the shares were down 0.4% to 600.50p.