September 22, 2004

UK Dairy Crest Reports Good Profit Growth In First Half 2004
 

Dairy Crest Group Plc, U.K.'s largest dairy-products producer, said profit showed "good growth'' during the first half of the year.

"This has been a solid six months of trading for Dairy Crest with results in line with expectations across our range of businesses,'' according to Chief Executive Drummond Hall. "We continue to be encouraged by the performance of our major brands.''

Dairy companies are expanding their offerings beyond milk to yogurts and drinks, which have higher profit margins. This move comes as the competition to supply supermarkets with milk intensifies and the volume delivered to U.K. homes declines. Supermarket operators have said they cannot pay a fixed amount to milk suppliers as they need to ensure their prices are competitive relative to rival grocers.

Last month, Dairy Crest said it will lose a 60 million pound ($108 million) contract with Tesco Plc, Britain's biggest retailer, in the first quarter of 2005.

Dairy Crest said it expects the contract loss to have a "significant impact'' on profit in the year ending March 31, 2006. Earlier in the year, the company also lost out on a 20 million-pound contract with Wal-Mart Stores Inc.'s Asda unit.

Shares of Dairy Crest have fallen 26 percent so far this year. Last month, the stock recorded its biggest drop in eight years, slumping 17 percent, following the announcement of the loss of Tesco contract.