Dairy Crest Axes 260 Jobs and Shuts Two Sites in Wake of 'Extremely Volatile' Markets

Dairy Crest plans to axe 260 jobs and close two sites as part of a £20m cost cutting plan in the wake of "extremely volatile" dairy markets.

The firm, which is best known for Cathedral City, Clover, Country Life and FRijj, said its dairies operations have been loss making despite an increase in property profits.

The business said it plans to close a glass bottling dairy in Hanworth, West London, and a specialist cream potting facility in Chard, Somerset.

The two sites currently employ around 260 people and Dairy Crest said the cost savings will contribute to its £20m ($32m, €25m) annual target in the future.

"We continue to take the difficult decisions that are necessary to drive the business forward," said Mark Allen, the chief executive of Dairy Crest.

The employer said exceptional cash costs associated with the closure of these sites, which will be charged over the next two years, will be around £15m.

But the firm anticipates that proceeds from the sale of these, and other previously closed processing sites, will exceed this amount.

Dairy Crest explained that there will also be non-cash asset write-downs associated with the closure of Hanworth and Chard of around £10m this year and £5m in subsequent years.

"We will be working closely with Dairy Crest to mitigate the job losses that are a severe blow to our hard working and dedicated members and their families," said Matt Draper, a national officer for the trade union Unite.

"Companies, such as Dairy Crest, are being squeezed by highly competitive supermarkets and dairy farmers seeking a decent return for the milk they produce."

The Dairy Crest also said that, in reaction to downward pressure on fresh milk selling prices and falling returns from dairy commodity markets have fallen, it has had to cut the prices it pay to its farmers for their milk in line with the rest of the market.

"Dairy markets have recently been extremely volatile," a statement from Dairy Crest read.

"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."

But the company said sales of its four key brands together grew by 4% in the first quarter compared to the first quarter of the year ended March and it expects to report a similar growth rate for the first-half.

The firm also said it expects overall first-half group profits to be "roughly in line" with last year.