Dairy Crest Reports 8% Rise in Branded Sales

Dairy Crest is issuing the following Interim Management Statement on its trading performance for the three months ended 30 June 2009. The Company is also announcing changes to its Board.

17/07/09 Trading in the first quarter of the year has continued in line with the anticipated trends set out in Dairy Crest's Preliminary Results released on 19 May 2009. Performance in its Dairies division in the three months to 30 June 2009 has improved from that reported in the equivalent three months last year.  This compensates for the unwinding of stock profits in its cheese business and confirms the benefits of being a broadly based dairy business.

Anthony Fry, who was appointed to the Board in July 2007, will take the role of Deputy Chairman.  He will take over from Simon Oliver as Chairman on 1 January 2010 when Simon will retire from the Board.  Simon will take on the position of Honorary Group President.

On 1 August 2009 Andrew Carr-Locke will be appointed to the Board as Non-executive Director and Chairman of the Audit Committee.  In this role he succeeds David Richardson, whose intention to step down from the Board was announced on 15 April 2009, and who will leave the Board on 1 August 2009.

Continued progress against key objectives

The Company's focus remains on the development of its brands and on improving its cash position.  It also continues to seek ways to reduce risk and focus the business on its core added value areas.

Against the uncertain trading environment we are pleased to report that our five key brands all continue to perform well.  Our strategy to increase expenditure on advertising and promotions is providing good growth.

We are also pleased to report that good progress on managing our debt has been maintained into the first quarter of 2009/10 from last year.

We have taken further steps to reduce risk.  We announced on 19 June 2009 that the Dairy Crest Group Pension Fund had purchased a second bulk annuity for members who retired before August 2008 that protects both the Fund and Dairy Crest against financial and demographic pension risk.  We continue to look at various options for the future of our final salary pension scheme.

Foods division

Sales in our Foods division for the quarter ended 30 June 2009 were in line with those for the quarter ended 30 June 2008, excluding share of joint ventures.

Sales of our key brands, Clover, Country Life Spreadable, Cathedral City and St Hubert Omega 3 were up in total by 14% in volume and 8% in value terms.  The markets for all these brands remain competitive.  We continue to advertise on television and to promote our products to demonstrate their value to consumers. In addition further innovation and range extensions will underpin volume growth.

We also continue to seek manufacturing improvements and drive efficiencies in our business.  As part of this we are pleased to report that our Nuneaton cheese packing facility is now operational.

Dairies division

We planned to reduce the amount of milk processed by the Dairies division in the quarter because of poor returns from dairy ingredients markets.  As a result, sales in the Dairies division for the quarter ended 30th June 2009 were down 3% compared to those for the quarter ended 30 June 2008.  Milk volumes to our key retail customers were up 4%, but have been offset by lower ingredients and middle ground volumes and prices.  The raw milk purchase prices that we pay to direct suppliers on Liquid contracts have fallen by 0.75ppl during the quarter to offset these lower returns.

FRijj, our fresh flavoured milk shake brand has grown volume and value by 22% in the quarter ended 30 June 2009 compared to the quarter ended 30 June 2008.

Our national launch of milk&more, our doorstep internet proposition, is progressing to plan and will be rolled out by September 2009.

In June 2009 Dairy Farmers of Britain ("DFOB") went into receivership.   We are pleased to welcome 114 dairy farmers to Dairy Crest who were previously supplying around 100 million litres of milk annually to DFOB.  We have also have started making sales to some customers previously supplied by DFOB, including The Cooperative Group.

On 1 July 2009 we purchased the remaining 50% of Fayrefield Foodtec Limited for £2.5 million (net £1.7 million after deducting cash balances taken on), having purchased the first 50% holding in December 2007 for £2.1 million.

Board Changes

Simon Oliver joined Dairy Crest's Board in 1997 and became its Chairman in 2000.  During his nine years as Chairman, Simon has overseen significant changes, including the acquisitions of Unigate's dairy and cheese business in 2000, the St Ivel Spreads business in 2002 and St Hubert in 2007.  In his time on the Board, the Group's turnover has increased from under £500 million to over £1.6 billion and operating profits have grown from around £40 million to over £100 million last year.  Simon will stand down as Chairman and retire from the Board on 1 January 2010.  He will take on the position of Honorary Group President from that date.

Anthony Fry is Senior Managing Director of Evercore Partners in the firm's London Office.  He has previously held senior investment banking positions at, inter alia, Credit Suisse and the Rothschild Group in a city career which has already spanned over 30 years.  He is currently a Non-executive Director of Control Risks and the BBC Trust.  Anthony takes on the role of Deputy Chairman and will become Chairman on 1 January 2010.

Andrew Carr-Locke was the Group Finance Director of George Wimpey plc from 2001 to 2007.  Currently he is a Non-executive Director of Royal Mail Holdings plc and of Venture Production plc, an oil and gas production company.  He was also on the Board of AWG plc until its sale to a private equity consortium.  Andrew will be appointed to the Board as Non-executive Director and Chairman of the Audit Committee on 1 August 2009.  There is no further information to be disclosed in accordance with Listing Rule 9.6.13 with regard to his appointment.