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Dairy Crest sells milk business to Müller

The company born out of the state milk marketing board is to sell its dairies business for £80 million as it focuses on household spreads and cheese brands.

Dairy Crest said the sale to Müller UK & Ireland would create a “more sustainable UK dairy sector by delivering economies of scale and cost efficiencies that will underpin investment in the industry”.

It added: “This should in turn help the UK to compete more successfully in global markets, which is essential for British dairy farmers”.

Plans for the disposal came as Dairy Crest posted a 95 per cent collapse in profit before tax to £900,000 in the first half of the year due to the closure of bottling and potting sites. However, on an underlying basis, profits were down 3 per cent to £21.3 million and revenue rose 1 per cent to £682.1 million.

The sale of its dairies business is the latest stage in Dairy Crest’s move away from unbranded commodity markets. It sold its commodity cheese operations in 2006 and is instead concentrating on its branded business, which includes Cathedral City cheese and Country Life and Clove spreads.

Dairy Crest emerged from the milk marketing board, the government body founded in 1933 to to buy milk from suffering farmers and floated in 1996. The company processes and delivers about 1.3 billion litres of milk per year to major retailers.

The sale includes the Hanworth glass bottling site in west London, which it moved to close in September, and 72 depots.

Dairy Crest said it would retain ownership of it cream potting facility in Chard, Somerset, which it plans to close.

Mark Allen, chief executive of Dairy Crest, said combining Dairy Crest’s dairies operations with those Müller UK & Ireland would create “efficiencies and economies of scale that will help to create a more sustainable UK dairy sector that is better placed to compete on the global stage”.

“The disposal will allow Dairy Crest to focus on continuing to grow our successful and innovative branded cheese and spreads operations.

“We are confident that this focus will deliver further medium term profit growth for our shareholders.”

The sale is subject to regulatory and shareholder approval, employee consultation and is expected to take several months to complete.

Source: - 6 November 2014