Dairy Crest will close two factories, in what it calls a 'challenging trading environment', which will put 260 jobs at risk.
"Our Dairies operations have been loss making in the period despite the increase in property profits. We continue to make progress with FRijj and sales are growing. We also continue to reduce costs in line with our £20 million annual target," the company announced.
Surrey-based Dairy Crest said they have started consultation with employees regarding the closure of the glass bottling dairy in Hanworth, West London and a specialist cream potting facility in Chard, Somerset. Together these two sites employ around 260 people.
"The resulting cost savings will contribute to our £20 million annual target in future years."
The company's dairy operations have been loss making in the period despite the increase in property profits.
"There is downward pressure on fresh milk selling prices and returns from dairy commodity markets have fallen steeply in recent weeks," the statement said.
"As a consequence we have regrettably cut the prices we pay to our farmers for their milk in line with the rest of the market."
"The exceptional cash costs associated with the closure of these sites, which will be charged over the next two years, will be around £15 million. However we anticipate that proceeds from the sale of these and other previously closed processing sites will exceed this amount.
"There will also be non-cash asset write-downs associated with the closure of Hanworth and Chard of around £10 million this year and £5 million in subsequent years.
"We expect to close our Crudgington butter and spreads factory early in the second half of the year."
Dairy markets have recently been extremely volatile. For example cream prices are currently down around 40% from their peak last autumn and both cream and skimmed milk powder prices fell nearly 15% in the month of August 2014 alone. This volatility makes them difficult to predict at this time. However, our overall profit expectations for the full year ending 31 March 2015 remain unchanged.
Mark Allen, Chief Executive, commented: "I am pleased that in the current challenging trading environment overall we continue to perform in line with our expectations. Taken together our key brands have performed strongly and the improvements we have made to our Dairies operations in recent years have made them more resilient. We continue to take the difficult decisions that are necessary to drive the business forward."
