Dairy Crest profit drops on lower cheese sales

Dairy Crest Group has posted a first half drop in profit as it struggles with lower selling prices across the business and reduced product volumes.

The FTSE 250 company released its interim results for the six months to 30 September on Thursday.

Revenue dipped by 5% on the previous year to £203.8m, causing a 13% drop in profit before tax to £13.1m.

Cheese and whey product group profits fell by £7.7m reflecting lower realisations ahead of reduced cheese costs and lower whey realisations.

However, the company’s leading cheese brand Cathedral City grew sales by 7%, with volume up 14%.

Spreads and butters group profits were also down as volumes declined caused by the falling market continued as well as competitors promoting butter aggressively.

But a strong performance from Dairy Crest’s Frylight range helped maintain margins in that division broadly in line with the same period last year at 15%

Chief executive Mark Allen said the company highlighted early in the year that profits would be weighted towards the second half.

“With the benefit of lower cheese costs and an expected improved performance from our Spreads and Butters business in the second half, our full year expectations remain unchanged.

"Following the sale of our dairies business, Dairy Crest will be a predominantly branded, simpler, more focused business with a significantly reduced overhead base.

“Future sales of ingredients for infant formula, which will start in the second half, will provide added impetus.”

Investors aren’t completely confident, with shares down 8p (1.24%) to 635p at 1103 GMT.