Following the sale, the dairy products group now expects its net debt at year end to be about £435m. Dairy Crest, whose brands include Country Life butter and Cathedral City cheese, said the sale was also consistent with its policy of focusing on core brands.
Trading remains in line with previous statements, the group said. The retail environment remains tough, Dairy Crest said, adding that it has been using promotions to grow volume. Sales of Country Life butter (helped by an advertising campaign featuring John Lydon – formerly Johnny Rotten of the Sex Pistols) and Clover are up by 25% to 30%. Cathedral City sales have increased approximately 10% by volume and 20% by value over the year, Dairy Crest said.
Speaking at a presentation for analysts, chief executive Mark Allen said Dairy Crest hadn’t been adversely affected by a move to own-label products as recession-hit consumers seek value. Volumes are down 4% in own-label dairy products, but Dairy Crest has been lifting volumes, he said.
He added that the company hadn’t had to use promotions more than anticipated, with 68% of goods sold at full price. The firm is coping with a decline in milk production in the UK by reducing the amount used as an ingredient in its products, he said, adding that it will reduce the total amount used by about 50 million litres this year.
Asked about dividends, Allen said the company recognised their importance and would factor this into its decision in May.
Finance director, Alistair Murray, said commodity price falls in areas outside milk should result in cost savings of about £15m to £20m.
Yoplait Dairy Crest was established in 1991 when Dairy Crest formed a joint venture with Yoplait SAS – the owner of the international Yoplait brand – to act as the distributor in England, Scotland and Wales for fresh dairy products supplied by Yoplait SAS from its factories in France.
The joint venture agreement with the Yoplait group contained provisions for termination in February 2012. Dairy Crest’s decision to sell its stake in YDC before that date is consistent with the group’s strategy to focus on and invest in wholly owned core brands that it owns.
Under the terms of the sale agreement, Dairy Crest will continue to distribute Yoplait products in Great Britain until March 2010. These products include Petits Filous, Frubes, Yop and Wildlife yogurts. In addition, Dairy Crest will take on the Yoplait group’s share of YDC’s defined benefit pension scheme liability, estimated at £1.5m.
Source: Sharecast
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