Dairy Crest Regulatory News (DCG)

29 Jan 2008 07:00

Dairy Crest Group PLC29 January 2008 29 January 2008 Dairy Crest Group plc ("Dairy Crest") Interim Management Statement Dairy Crest is issuing the following trading update covering its third quarter,the three months ended 31 December 2007. Overall the Group's expectations forthe full year remain unchanged. In the Foods division, sales for the three months grew by 40% overall againstthe same period last year and by 17% on an underlying basis excluding St Hubert,which was acquired in January 2007. This is the result of both price increasesimplemented in the autumn of 2007, which reflected higher raw material costs,and the continued good performance of a number of our key brands. Cathedral City, Utterly Butterly, Petits Filous and St Hubert Omega 3 all grew strongly duringthe period. Cathedral City, our market leading cheddar brand, has again delivered strongdouble-digit growth and is now worth over £150 million at retail sales value.With Clover operational issues now resolved, we will be promoting the brandagain in the last quarter. This will be supported by a new televisionadvertising campaign. In the Dairies division, sales for the quarter grew by 13% reflecting good milksales volumes over the Christmas period and the impact of price increasesimplemented across all of the Dairies markets. This was a direct consequence ofhigher raw milk costs. Importantly we maintained high service levels to ourmajor retail customers over this key trading period. In Household, trials in five depots of 'milk&more', our new internet-basedservice delivery model, have continued to progress well. We are now extendingthe trials to five further depots in the Bristol Area. In addition we havedecided to accelerate the roll out of the ability to order products and pay overthe Internet - a key feature of 'milk&more' - to most of our doorstep customersthis year. Milk prices have risen sharply this year on the back of volume shortages, higheron-farm costs and increased commodity prices. Although commodity prices have nowstarted to fall, we have implemented a further raw milk price increase onliquids contracts of 0.4 pence per litre from December 2007 in order to continueto support our milk suppliers. As previously announced on 7 December 2007, Dairy Crest, in common with a numberof other processors and retailers, reached an early resolution agreement withthe Office of Fair Trading concerning its investigation into the "milk priceinitiatives" of 2002 and 2003. Under this agreement Dairy Crest expects to pay asignificantly reduced fine of £9.4 million provided that it continues tocooperate fully with the OFT's investigation. This amount will be treated as anexceptional item in the current financial year ending 31 March 2008. The Group's cashflow from operations is in line with expectations. However theappreciation of the Euro against Sterling since the end of September means thatGroup net debt at the year-end will be approximately £20 million higher thanpreviously anticipated assuming that there are no further significantfluctuations in the exchange rate. In addition, going forwards, the higher costof raw milk is expected to increase the working capital requirement in ourcheese business. Recent fluctuations in the financial markets will have had an impact on thereported pension fund deficit since it was last valued at £11.1 million at theend of September 2007. The deficit is, inevitably, sensitive to changes infinancial markets as well as the underlying assumptions. We will give moredetailed guidance on any movement in the deficit with the year-end tradingupdate based on the position of the financial markets at the end of March. Mark Allen, Chief Executive of Dairy Crest, commented: "We have continued to make good progress this year. We are again pleased withthe strong performance of a number of our key brands including Cathedral City,Utterly Butterly, Petits Filous and St Hubert Omega 3. Despite the challenging market conditions our expectations for the full yearremain unchanged." The Group expects to issue a full year trading update on 28 March 2008 and itsPreliminary Results for the year ending 31 March 2008 on 20 May 2008. For further information, please contact: Dairy Crest Group plcWill Shaw, Investors 01372 472477Nicole Lander, Media 01372 472419 BrunswickSimon Sporborg 020 7404 5959Laura Cummings This information is provided by RNS The company news service from the London Stock Exchange