Milk producer Dairy Crest has announced a net loss of £10.1m for the year ending 31 March 2012 after a dismal performance in its dairies business.
The loss comes after the value of a number of assets was cut and margins in its milk division were squeezed. A spokesperson for the company told The Manufacturer that profit margins on milk products had shrunk to 1% with farmers increasing prices and supermarkets using the product as a loss leader.
The company has said that it hopes to increase profit margins on its milk products from 1% to 3% over the medium-term, which is typically known to be between three to five years.
Dairy Crest intends to create a new strategy for its dairy business with revenue falling by 2% . Plans to close the company’s glass bottling plant in Merseyside and its plastic bottling plant in Cambridge are already under way and could result in the loss of 500 jobs.
The board also announced in April that its current contract to supply liquid milk to Tesco, which accounted for around 3% of Dairy Crest’s sales during the 12 months to March 31, will not be renewed when it comes to an end in July 2012.
However, strong sales within the company’s food arm compensated for poor sales within the milk division, rising by 10%. Sales of the company’s five key brands Cathedral City, Clover, Country Life, St Hubert and Frijj were up 11%. Butter and margarine producer Clover saw sales increase 16% year-on-year.
“Dairy Crest’s results for the year demonstrate the continued benefit of being a broadly based business. Double digit growth in our branded spreads and cheese businesses has offset unsatisfactory results in dairies,” said Mark Allen, chief executive at Dairy Crest.
“This has been made possible by a programme of consistent investment in developing our key brands and building a modern, efficient supply chain.”