March 31, 2008

Dairy Crest may increase prices soon
 

Dairy Crest, the UK's largest dairy product manufacturer, may need to raise prices in the coming months, said the company's Chief Executive Mark Allen.

Cattle feed grain costs have risen as farmers use land for biofuels, leading to an increase of about 40 percent in milk prices in the last seven months.

Milk prices will have to go up further to reach its profit margins as Dairy Crest can pass these hikes onto supermarkets and UK customers who think dairy products are extremely good value, said Allen.

Dairy Crest shares went down by 7 percent to hit a 20-month low at 492.8p due to concerns over the increased cost of milk and other raw materials for dairy products, an analyst said.

The company expects to meet underlying profit forecasts for the year to today, March 31, but will face a one-off cost due to surging milk prices, it said in a trading statement.

Dairy Crest, the maker of Cathedral City cheese and spreads Utterly Butterly and Clover, supplies milk to supermarkets such as WM Morrison, and delivers it directly to about 1.5 million households.

Last year, the company increased the price it charges UK households for a pint delivered by the milkman by 4 pence.

No recent price adjustments have been made for supermarket customers.

Upward adjustments in supermarket prices would allow Dairy Crest to increase its margins, said Numis analyst Ian Kellet.