Dairy Crest confirms plans to expand Davidstow milk processing facility

UK-headquartered Dairy Crest has confirmed plans to invest £45m at its milk processing facility in Davidstow, Cornwall, to produce demineralised whey powder – a key ingredient for baby food.

The company plans to remove minerals from whey, the liquid by-product generated during the cheese-making processes, and produce demineralised whey powder.

The Davidstow creamery currently produces standard whey powder, which is mostly sold to food manufacturers.

Production is slated to begin in the first half of 2015, with the company anticipating the project to contribute more than £5m to its full year operating profits after additional depreciation charges of around £4m, effectively providing a five-year cash payback.

The latest development was announced in the company’s pre-close trading statement for the six months ending 30 September 2013.

Dairy Crest stated that its cheese business has performed well in the first half and the company expects sales of Cathedral City to increase compared with the same period last year.

The butters and spreads market has been challenging and profits in the company’s spreads business will be lower than last year, it said.

The dairies business continues to improve towards its medium-term target of 3% return on sales; however, first half profits will be impacted due to property divestments, which will be weighted to the second half, the company added.

Dairy Crest CEO Mark Allen said, "We continue to perform in line with our expectations despite the challenging trading environment."

"The butters and spreads market has been particularly difficult. We have offset pressures there by growing our cheese business, reducing our cost base and improving the underlying performance of dairies," he added.

"We are excited by our investment in whey which is in line with our strategy of growing added value sales, and expect this to generate attractive returns for shareholders."