Dairy Crest maintains outlook although net debt to be slightly higher

Dairy Crest, the maker of Utterly Butterly, Clover and Cathedral City Cheddar cheese, maintained its outlook for the year although its expects net debt to be "somewhat" higher than last year due to rising milk and cheese prices in Britain.

Britain’s largest dairy food company said that its outlook for the full year remains in line with expectations and that it saw further milk cost inflation since the half year and since June 2016 it has increased the price paid to farmers by 38% to 8.28p per litre.

It said that market prices for cream, which determines the input costs for its butter business, have remained high after more than doubling in the first half of the year and that “these movements inevitably result in a short-term working capital outflow and, as a result, we now expect year end net debt to be somewhat higher than 31 March 2016”.

Meanwhile, Dairy Crest said that for the nine months ended 31 December 2016, its brands Clover, Frylight and Country Life have all grown volumes while Cathedral City improved in the third quarter. Overall their combined volumes are in line with the same period last year.

There were also “significant improvements” in the percentage level of demineralised whey, which is used to make baby milk, hitting the infant formula grades at its factory in Davidstow, and the company remains confident that it will continue to rise and hit its target of over 80% by 31 March.

In December 2016, Dairy Crest partnered with Danisco Animal Nutrition, part of DuPont, to explore the potential uses of galacto-oligosaccharide (GOS) in poultry and swine, and the company said that if this is successful, it could help to broaden the potential market for GOS beyond baby formula.

Chief executive Mark Allen said: "The business has continued to make progress during the quarter. Our brands have performed well supported by successful innovation and brand investment. I'm particularly pleased to see the improvement in Cathedral City's performance.

“At the new Davidstow functional ingredients facility we are seeing significant improvement in the percentage level of demineralised whey meeting infant formula grade. This is important in maximising future opportunities in this market.”

Shares in Dairy Crest were up 1.54% to 607p at 0807 GMT.