Dairy Crest milk sales go sour but cheddar cheese churns up a profit

 
Kasmira Jefford
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DAIRY Crest said yesterday that it has sold enough milkshakes and blocks of cheddar cheese to offset losses across its dairies business as the company battles with falling milk prices.

The FTSE 250 company said its cheddar brand Cathedral City and FRijj milkshakes both performed strongly in the nine months to 31 December, although sales of Clover and Country Life butter were lower.

Dairy producers have come under pressure due to a glut in domestic milk supply combined with falling demand from China and Russia’s ban on EU foods. As a result, the average farm-gate milk price has fallen steadily since February 2014.

Dairy Crest said its liquid milk operations struggled in the first half of the year, due to falling prices. However, it anticipates a stronger performance in the second half.

“Against the background that we operate in, Dairy Crest has delivered a solid performance. Maintaining the sales of our four key brands in line with last year and growing our overall cheese and spreads profits is a good result in today’s challenging environment,” chief executive Mark Allen said.

The company is in the process of selling its milk business to Muller UK & Ireland as it shifts its focus to cheese and spreads. Allen said the deal was progressing to plan and had received shareholder approval.

Earlier this month, the company lost a third of its fresh milk contract with Morrisons to rival milk producer Arla after signing a new three-year deal with the supermarket chain.

Because of the sale to Muller, losing the volume is unlikely to affect its future profit, analysts said.

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