Loss of Tesco contract hits UK dairy giant profits

Dairy Crest today reported a decline in pre-tax profits after rising energy costs and the loss of a contract to supply milk to Tesco outweighed strong sales of its branded cheeses and spreads.

The UK’s second largest dairy company – behind Lurpak butter maker Arla – said it had delivered results in line with market expectations for the year to March 31, with pre-tax profits down 10.5% to £67.7m (€99.12).

Chief executive Drummond Hall said while conditions remained challenging at the start of the new financial year “trading is on track”.

The group has seen strong performances from a number of key brands, including Cathedral City cheeses, Clover and Country Life spreads.

The company’s yoghurt and desserts joint venture with Yoplait also reported strong growth with Petits Filous, Frubes and Yop among brands doing well, Dairy Crest said.

The company’s strategy has been focused on developing the branded side of its operation, led by Cathedral City. The cheddar is made at the company’s Davidstow Creamery in Cornwall and boasts annual sales of more than £100m (€146.42m), making it the UK’s biggest natural cheese brand.

Revenues in the firm’s dairy division increased by 10% reflecting the acquisition of the Midlands Co-Op Dairies in May last year.

However, fresh milk volumes to major retailers were down 17% primarily due to the loss of the Tesco contract, the firm said. Volumes have benefited in the second half due to increased business with Morrisons which began October.

Group revenues including joint ventures reached £1.42bn (€2.08bn), up from £1.35bn (€1.98bn) the year before.