Dairy Crest Regulatory News (DCG)

26 Sep 2007 07:01

Dairy Crest Group PLC26 September 2007 26 September 2007 Dairy Crest Group plc ("Dairy Crest") Trading Update In line with its normal practice, Dairy Crest is issuing the following pre-closetrading update for the six months ending 30 September 2007. Overall the Group continues to trade in line with our expectations showinggrowth from a number of our key pillar brands, a successful rollout of healthierproducts and positive progress by our international business, St Hubert. Unprecedented changes have taken place in the dairy industry since the beginningof the year. The world markets for skimmed milk powder and bulk butter have beenparticularly strong. This, together with lower milk production levels due to theadverse weather over the summer, has led to considerable upward pressure on rawmilk prices. This in turn has resulted in price rises across most dairycategories. As a result of these changes Dairy Crest will increase the price itpays to its direct suppliers on liquid milk and cheese contracts to 25.0 and24.7 pence per litre respectively from October. We have agreed price increasesto our customers in cheese, fresh milk, potted cream and packet butter whichreflect these higher input costs. Foods In the Foods division the cheese business has made good progress benefiting fromthe continued growth of Cathedral City. Cathedral City Lighter, which waslaunched in February, is performing well and is now achieving good distributionacross the retail trade. In UK spreads, Utterly Butterly has returned to good levels of growth supportedby increased levels of marketing and promotional activity. In addition, inAugust, we launched a new variant of Utterly Butterly with added Omega-3.Country Life Spreadable is again growing strongly helped by the launch in May2007 of Country Life Spreadable Lighter. Clover volumes in the first half havebeen significantly impacted by the product recall in May. Whilst base levels ofsales quickly returned towards normal levels, promotional activity has beenlimited due to ongoing improvement activities at the factory. The costsassociated with this, together with higher cream prices, will materially impactthe performance of UK spreads this year. The St Hubert business, which we acquired in January, is making encouragingprogress in line with our business plan and has gained market share in France.This performance has been driven principally by the continued strong growth ofSt Hubert Omega 3, which is now the number one brand variant in the Frenchspreads market. Yoplait Dairy Crest has also performed well with Petits Filous, Frubes and YOPall showing good growth. Dairies Our Dairies business is making progress as we continue to take costs out of ouroperations. As planned we ceased production at Totnes in September andprocessing has been moved to other dairies. Overall volumes to major retailersare slightly up on the first half of last year. We have also seen good growth inpotted cream and flavoured milk. Our ingredients operations have benefited fromthe strong markets for dairy products. However volumes were impacted over thesummer period due to shortages of milk. In Household, to reflect the significant increase in the cost of raw milk we areimplementing price increases in both the middle ground and doorstep sectors. Inour doorstep business the underlying annual decline rate is currently running ataround 7% and we are continuing trials of 'Milk & More', our new internet basedservice delivery model. The integration of the Express Dairies business remains on track. We have closednine overlapping depots, rationalised shifts at the Nottingham and Liverpooldairies and, in line with our original plans, the administration office inLeicester will close this autumn. As previously announced on 20 September 2007, the Office of Fair Trading ('OFT')has issued a Statement of Objections to retailers and dairy processors in itsinvestigation into pricing in the dairy produce sector. Dairy Crest is reviewingthe OFT's provisional findings in detail and will respond accordingly. Mark Allen, Chief Executive of Dairy Crest, commented: "The UK dairy market has seen unprecedented changes in recent months. Againstthis market background the Group overall is trading in line with ourexpectations. We have been successful in achieving higher prices across a rangeof products, enabling us, in turn to deliver higher prices to our direct milksuppliers. A number of our key pillar brands including Cathedral City, Country Life,Utterly Butterly and Petits Filous are performing strongly and we continue toroll out healthier products. We are also particularly pleased with the continuedencouraging contribution made by St Hubert." Interim results for the six months ended 30 September 2007 will be announced on8 November 2007. There will be a conference call for analysts today at 8.30am. Dial in telephone number: +44 (0) 1452 561 263Replay facility (until 3 October): +44 (0) 1452 55 00 00Pin number for replay: 17763647# 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