Dairy Crest says it expects its half-year profits to be ahead of previous year on the back of strong sales of its dairy products.
Advertisement
But Cathedral City was expected to suffer a small volume decline in the first half of the year compared with “a very strong performance in the first half of last year“. “As such our full-year outlook remains unchanged”. In order to maintain the brand’s premium positioning within the category we have chosen to discount less than our competitors during the period.
Dairy Crest Group plc (LON:DCG) had its price target upped by Peel Hunt from GBX 660 ($8.79) to GBX 720 ($9.59) in a research report issued to clients and investors on Monday. We continue to see good momentum from our key brands. “Recently we have seen inflation across all dairy markets”. Our butters, spreads and oils business delivered strong volume growth and increased market share in the first half.
Last week, Dairy Crest announced a 1.5p per litre increase to the price it pays farmers for milk.
“Dairy Crest is well placed to deal with inflationary pressures”.
The FTSE 250-listed firm said milk price inflation has increased by 12 per cent “over a very short period”, while cream prices have doubled.
However, the business’ margins are likely to be impacted by inflation in the dairy industry.
City analysts Shore Capital forecast six months of strong profits growth, with current pre-tax profit (CPTP) of about 16% to total £18.5M.
Dairy Crest added that butter volumes and margins will be hit by the sudden price rise, but said its full year profit expectations remain unchanged.
“Three of these brands, Clover, Country Life and Frylight are all showing strong volume growth and continue to increase market share, building on momentum from the second half of past year”.
Dairy Crest, one of the biggest dairy companies in the United Kingdom, said there had been a “sudden” increase in the price it pays for milk.
Advertisement
The increases mean that by November, Dairy Crest’s standard milk price of 24.22p/litre will have risen by 11.51% over the previous three months.
