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AGM and Interim Management Statement 2013

16/07/2013

Dairy Crest, the leading UK-owned dairy foods company, is issuing the following Interim Management Statement for the 3 months ended 30 June 2013 at its Annual General Meeting later today.

Dairy Crest's overall trading in the first quarter has been in line with our expectations and our financial position also remains in line. Our expectations for the full year remain unchanged.

In the period we have focused on the profitability of our key brands and our dairies business. Cost reduction remains key to our success.

Against strong comparatives and in a tough consumer environment, sales of two of our four key brands, Cathedral City and Clover, increased in the quarter ended 30 June 2013 compared to the quarter ended 30 June 2012. Both these brands outperformed their respective markets. Sales of Country Life Spreadable were flat, however Country Life block sales were significantly lower as we chose to promote less following recent cream price increases. As planned we have also scaled back FRijj promotions while we upgrade our capacity and capability. This will allow us to produce different formats and pack sizes and remove constraints on meeting promotional demands. Overall sales of our four key brands were 4% lower than the same quarter in the previous year when we reported sales up 15% compared to the quarter ended 30 June 2011.

The profitability of our Dairies business continues to improve towards our 3% medium-term target. This reflects our focus on cost reduction and the higher returns from cream which have also enabled us to pay farmers more for their milk. We are pleased to have renewed our annual contract to supply liquid milk to Lidl. More recently we have started consultation with employees regarding a proposal to sell our depot-based milk delivery business in North West England. This is likely to be completed later this month.

We are on target to reduce our costs by £20 million this year. The reorganisation into a single structure that we announced in February is going to plan. This has already helped us identify a number of opportunities to strengthen the business and supports our cost reduction target.

We have been considering how we can add greater value to the high quality whey stream at our Davidstow creamery. We are now clear that our chosen route is to make demineralised whey powder. This is a base ingredient for baby food - a rapidly growing market with significant potential. We expect this project to generate attractive returns for shareholders. We are currently finalising the necessary investment required to move this forward and are talking to several prospective partners. We expect to provide more details at our September trading update.

Mark Allen, Chief Executive, commented:

"We are pleased with our start to the financial year and despite the challenging environment we are trading in line with our expectations.
Our key brands have stood up well in the first quarter against tough comparatives, our Dairies business is improving and we are confident about our cost savings. All three of our product categories, Cheese, Spreads and Dairies, are well positioned to generate medium-term growth.
We are also making good progress with new projects to increase the returns we get from whey and move into other added value products."

Dairy Crest's Annual General Meeting will be held today at midday at the offices of Eversheds LLP, 1 Wood Street, London EC2V 7WS.

Dairy Crest expects to issue its half-yearly trading update on 23 September 2013 and its Interim Results for the six months ending 30 September 2013 on 7 November 2013.

For further information:

Dairy Crest
Arthur Reeves 01372 472236

Brunswick
Simon Sporborg 020 7404 5959