Dairy Crest, the UK dairy group, increased revenue by 10% to £456.8 million and adjusted profit before tax increased by 2.8% to £62.3 million for the year ended 31 March 2018, compared with the previous year. Dairy Crest’s Cheese & Functional Ingredients business increased revenue by 8.8% to £277.2 million while revenue at the Butters, Spread & Oils business rose by 15.6% to £174.2 million.
Overall product group profit increased by £3.5 million to £71.8 million and the margin decreased slightly to 15.7% (2017: 16.4%).
The Cheese & Functional Ingredients product group profit increased by 17.1% to £50.1 million and the margin increased to 18.1% (2017: 16.8%). This reflects an improved Functional Ingredients performance and a rising dairy market where selling price increases were achieved. However, the full impact of milk input cost increases will not be felt in cost of sales until 2018/19 given the year-long average maturation cycle of our cheese.
The Butters, Spreads & Oils product group profit of £21.7 million was £3.8 million lower than 2017 with profit margins of 12.5% (2017: 16.9%) reflecting the competitive butters and spreads market and significantly higher butter input costs. However, margins in the second half increased markedly versus the 3.7% delivered in the first six months of the year as cost pressures abated somewhat.
Innovation is at the heart of Dairy Crest’s business. Its innovation centre is now firmly established on the campus of agricultural university, Harper Adams. 14% of Dairy Crest’s revenue came from innovations developed during the previous three years, driven largely by the success of Clover spread with no artificial ingredients.
Dairy Crest currently has five well-invested operating sites employing around 1,100 people. At the end of 2017, it moved production at the butters and spreads site in Kirkby onto a 24/7 manufacturing schedule which allows greater flexibility to adapt to changing market conditions. The restructuring has resulted in one-off exceptional costs of approximately £5 million but will reduce the annual cost base by £2.5 million from the next financial year onwards.
Mark Allen, chief executive of Dairy Crest, comments: “This has been a year of considerable progress for Dairy Crest. We have delivered a strong performance, broadly maintaining our industry-leading margins against a backdrop of unprecedented cost inflation in the butters market. Our brands are in good shape. Cathedral City has had a good year growing value, volume and market share, and we see plenty of room for further growth for this industry-leading brand. We have seen good momentum in revenue growth going into the new financial year.”
He continues: “With much of the groundwork now complete, we expect sales of demineralised whey at infant formula grade to accelerate further over the coming year. We have already established ourselves as a leading supplier for organic GOS and we are also making good progress in developing a market for GOS beyond infant formula, having carried out research which has shown the meaningful benefits of using this product in animal feed. We will continue to invest in our brands, supply chain and infrastructure to ensure that we are well positioned to capitalise on future growth opportunities.”