Dairy Crest sales up but milk price hits profits

The cheese-maker Dairy Crest's like-for-like sales rose 2 per cent in the first three quarters of the year, despite a "challenging business environment". But the company warned that profits at its dairies business are being hit by the higher costs of buying milk and lower bulk cream values, which fell by 15.2 per cent last month to £1,230 a tonne.

Dairy Crest is trying to cut yearly costs by £20m.

Figures for the last nine months of 2011 prompted the broker Panmure Gordon to forecast a slump in operating profits at the dairies business from £27m to around £6m.

The analyst Damien McNeela said: "It could potentially seek a lower milk price from farmers."

However, Dairy Crest denied it is planning to slash its milk prices to farmers.

The company said its food division had been boosted by strong marketing. French spreads business St Hubert, in particular, increased its market share in the third quarter.

Meanwhile, sales of Country Life, advertised by John Lydon, above, and Cathedral City, rose 8 per cent, year-on-year, in the three months to the end of December.

Mark Allen, Dairy Crest's chief executive, said: "We continue to manage the business proactively to meet the challenges we face."