Thursday preview: Dairy Crest to reveal impact of higher dairy prices

Dairy Crest’s profitability has been hit by rising dairy prices in the company’s butter business, the group is expected to reveal in its latest interims on Thursday.

Prices for dairy products have surged since the UK voted to leave the European Union in June. A weaker pound following the Brexit vote has sent input costs of dairy products higher.

Cream prices in particular have more than doubled. Wholesale bulk cream currently trades around £1,620 per tonne compared to £860 per tonne in May 2016.

In November at the first half results, Dairy Crest warned that higher cream costs will squeeze the Spreads margin in the second half

At the time, the group reported a 7% drop in first half revenue to £190m, due to continued deflationary pressures on the sector.

The company said deflationary pressures impacted sales, which were down 8%.

However, adjusted profit before tax rose 19% to £19.1m, driven by volume growth in three of its core key brands - Country Life, Clover and Frylight.

Its fourth core brand, Cathedral City cheese, on the other hand, saw volumes fall 5% due to tough comparatives. Dairy Crest said it expects Cathedral City volumes to improve in the second half following its relaunch of the brand.

Meanwhile, net debt was £262.3m at the end September compared to £229.0m at the end March due to repayments to Muller UK & Ireland Group following the sale of Dairy Crest's Dairy business.

The Dairy business was sold to Muller in December 2015 for a total consideration of £80m. Initial proceeds for the sale received during the year ended 31 March 2016 amounted to £54.5m, but it was subject to further adjustments relating to profit and working capital amounts in the pre-sale of the Dairies business, compared to targeted levels.

Due to final adjustments of the consideration, £25.9m was repaid to Muller in April 2016 with a further £2.5m repaid in August 2016.

Numis said the key focus in Thursday’s interims will include the performance of its branded products, any remarks on input costs, pointers on net debt and any comments on full year results.

Thursday 09 February

INTERIMS
Ashmore Group, Frontier Developments, InnovaDerma

INTERIM EX-DIVIDEND DATE
Conviviality, Daejan Holdings, Gateley (Holdings) , Murgitroyd Group, Rank Group, Stagecoach Group

QUARTERLY EX-DIVIDEND DATE
IBM Corp., JPMorgan Claverhouse Inv Trust, Picton Property Income Ltd, Unilever

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Continuing Claims (US) (13:30)
Current Account (GER) (07:00)
Initial Jobless Claims (US) (13:30)
Wholesales Inventories (US) (15:00)

FINALS
Bank Pekao SA GDS (Reg S), Smith & Nephew

SPECIAL EX-DIVIDEND DATE
Aberforth Smaller Companies Trust

EGMS
Datang International Power Generation Co Ltd.

AGMS
easyJet, Enterprise Inns, Paragon Group Of Companies, Premier Asset Management Group, Thomas Cook Group

FINAL DIVIDEND PAYMENT DATE
Aberdeen Asset Management, Euromoney Institutional Investor, ZPG Plc

FINAL EX-DIVIDEND DATE
Aberforth Smaller Companies Trust, JPMorgan Russian Securities, Polar Capital Global Financials Trust, Sage Group