Anthony Fry, chairman of Dairy Crest, made the following interim management statement at the company's Annual General Meeting this week.
As expected, it has been a difficult quarter for our Dairies business, along with the rest of the sector. However, we have taken decisive steps to return it to a satisfactory level of profitability.
We have set a medium-term target of 3% return on sales and are making progress towards it. Plans to close two dairies announced in April are on schedule and resulting capacity reductions are allowing us to improve selling prices in parts of this business.
Lower returns from commodity cream markets have also led us to announce milk purchase price cuts. Regrettably, these cuts have put pressure on our supplying farmers and we're working with them on plans to reduce the impact of these cuts. These plans include the early adoption of a new code of practice in relation to our milk supply contracts.
As announced on 29 June 2012, we have received a binding offer for our French spreads business, St Hubert, for €430m (£344m). If the proposed transaction completes, the proceeds of this disposal will substantially reduce our net debt.
From a strengthened financial position, we will then consider a range of options taking into account the interests of all stakeholders.
Total sales of our four UK key brands (Cathedral City, Country Life, Clover and Frijj) have increased by 15% compared to the same period last year. We continue to increase our investment in marketing these brands and for the first time all four brands will feature on television in the first half of the year.
We remain committed to making efficiency savings of £20m this year and are on track to meet this target.
Source: Dairy Crest
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