"Substantial" cream price rises churn Dairy Crest margins but cheese stops nightmares

Jasper Jolly
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How now, dairy cow? Higher cream prices have squeezed Dairy Crest margins (Source: Getty)

Cream prices churned “substantially” higher in the second quarter of the year, according to butter and cheese giant Dairy Crest.

The producer of Cathedral City cheddar, Clover margarine and Country Life butter said margins in its butter business will be swallowed up by the rising cream costs, which is an important part of butter production.

The FTSE 250-listed company was forced to reduce advertising spending on its cash cow Country Life butter to maintain its cost buffers.

However, cheese production saved the group from nightmares, with overall Cathedral City volumes up 15 per cent on last year in three months to the end of June.

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Sales of the company’s four key brands (which also includes low-calorie spray Frylight) rose by seven per cent overall, the company said.

Mark Allen, Dairy Crest’s chief executive, said: “Despite the pressure on butter input costs, the strong performance of our cheese business means that our expectations for the year remain unchanged.

"The year has started well and our branded business has delivered good growth in the first quarter. The functional ingredients business continues to progress well and new customers are being signed up. We still expect that the profit contribution from this business will be second half weighted.”

Trading was in line with expectations with the outlook for the full year unchanged, Dairy Crest said. It holds its annual general meeting later today.

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