Dairy Crest looks to future with sale of loss-making dairy unit

Sales slip lower in tough trading environment but boss focuses on future as a slimmed down business.
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Dairy Crest’s sale of its loss-making dairies business to Müller signals a “new era” for the group, with it becoming a “brand-focused” business with lower costs.
Posting half-year results, the FTSE 250 business said it expected the sale to return proceeds of between £40m and £50m, having received approval from competition regulators last month. The deal is expected to complete on December 26.
Dairy Crest announced plans to sell the division to the German group last year for about £80m as profits tumbled in the face of an oversupply in the milk market and a price war among supermarkets.
In the six months to the end of September, Dairy Crest, whose brands include Cathedral City cheese and Country Life butter, reported revenue from continuing operations – which does not include the diary divisions – of £203.8m, down 5pc on the same point last year. Pre-tax profit also fell, down 13pc at £13.1m.
However, the company took a £106.2m impairment on the sale of the dairy unit, contributing to a post-tax loss of £109.4m for the six months.
Mark Allen, chief executive, said: “The sale of our dairies operations leaves Dairy Crest well positioned for long-term profitable and sustainable growth alongside strong cash generation. Following the sale of our dairies business, Dairy Crest will be a predominantly branded, simpler, more focused business with a significantly reduced overhead base.”
Market conditions remain challenging, he added, but the reshaped business should start to grow in the second half of the coming year.
Under its new structure the company plans to focus on its four key brands, though these turned in a mixed performance over the period.
Sales volumes of Cathedral City cheese rose 14pc and Frylight oil was 46pc higher, but Clover spread was down 14pc and Country Life butter was 12pc lower. However, the company described this as an “overall strong” performance in a deflationary market.
The company is also breaking into new markets, starting sales of infant formula in second half of the year, which it expects to deliver a boost.
During the period Dairy Crest refinanced, securing a £240m debt facility. Its overall debt rose by 16pc to £242.3m.
The interim dividend was increased by 2pc to 6.1p a share.
Analysts at Shore Capital congratulated Mr Allen on managing the sale of the diary unit and getting the business out of what they described as the “highly irrational British liquid milk market” with one “one of the most challenging pieces of deal-making in the industry”.
They also said China’s recent decision to drop its one-child policy could deliver a boost to the business, with the potential for increased demand for infant formula.
The reshaped and focused Dairy Crest is now an attractive bid target, they said.
“Dairy Crest should approach 2016 with an expectation that it may be a highly sought after proposition. We believe the group will be subject to considerable international trade interest with its well invested facilities producing high quality and market leading proprietary brands,” the analysts said in a note. “Who, what and when, we’re clearly not in a position to be too demonstrable on this point but we would suggest that it will be a case of ‘when’ Dairy Crest is approached and not ‘if’.”
 
Source: Telgraph
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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