Interim Management Statement

09 Feb 2017

Dairy Crest is today issuing its Interim Management Statement for the nine months ended 31 December 2016.

Outlook

The outlook for the full year remains in line with our expectations.

Branded performance

Our key brands have continued to perform well. Clover, Frylight and Country Life have all grown volumes in the first nine months of the year and have taken significant share in their respective markets. As predicted, Cathedral City performance improved in the third quarter.

Overall, in the first nine months of the year the combined volumes of Cathedral City, Country Life, Clover and Frylight are in line with the same period last year.

Innovation and brand building continues to be at the heart of what we do. Clover and Frylight have both seen new packaging launches during the quarter and Frylight has been supported by a new TV advertising campaign over the last six weeks. In January 2017, Clover won the spreads category “Product of the Year 2017” award in the world’s largest consumer survey award for product innovation. This is a testimony to the work we undertook to remove artificial ingredients from Clover. Furthermore, in October 2016 Frylight won the Institute of Grocery and Distribution Health and Wellness award. We will continue to invest in innovation and marketing across our key brands through 2017.

Functional Ingredients

Production of demineralised whey powder and galacto-oligosaccharide (“GOS”), both ingredients for the growing global infant formula market, continues to develop well at our factory in Davidstow. There have been significant improvements in the percentage level of demineralised whey hitting the important infant formula grade. We remain confident that this will continue to rise and that we will hit our target of over 80% by 31 March 2017.

On 21 December 2016, Dairy Crest announced that it had entered into a research partnership with Danisco Animal Nutrition, part of DuPont, to further explore the potential uses of GOS in poultry and swine. If successful, this work would help to broaden the potential market for GOS beyond infant formula.

Balance sheet

We have seen further milk cost inflation since the half year and have now announced increases in the price paid to farmers of 8.28 pence per litre since June 2016. This represents an increase of 38%. Furthermore, market prices for cream have remained high after more than doubling in the first half of the year. The cream price determines the input costs for our butter business. These movements inevitably result in a short-term working capital outflow and, as a result, we now expect year end net debt to be somewhat higher than 31 March 2016.

New auditor appointment

The Board has approved the appointment of Deloitte as external auditor for the year commencing 1 April 2017. This appointment will be subject to shareholder approval at the 2017 Annual General Meeting. The Group's current auditor, Ernst & Young, is retiring by rotation and will carry out the audit for the year ending 31 March 2017. The Board would like to thank Ernst & Young for their contribution to the business over many years.

Mark Allen, Chief Executive of Dairy Crest, commented:

“The outlook for the full year remains in line with our expectations.

The business has continued to make progress during the quarter. Our brands have performed well supported by successful innovation and brand investment. I’m particularly pleased to see the improvement in Cathedral City’s performance.

At the new Davidstow functional ingredients facility we are seeing significant improvement in the percentage level of demineralised whey meeting infant formula grade. This is important in maximising future opportunities in this market.

The announcement of the partnership with Danisco Animal Nutrition marks a further significant step in the development of GOS beyond infant formula. This has exciting potential opportunities for the future.”

Dairy Crest will issue its Preliminary Results for the year ending 31 March 2017 on 18 May 2017.

For further information, please contact:

Dairy Crest

Alistair Smith

01372 472236

Dairy Crest

Tom Atherton

01372 472264

Brunswick

Mike Smith

0207 404 5959