LONDON -- Dairy Crest Group (LSE: DCG ) announced this morning that it has fought off strong competition to retain its contract to supply milk to Sainsbury's. The new contract will begin in February 2014 and will run for a further three years.
The leading U.K.-owned dairy foods company went on to state, "Although the conditions of the contract will change from 2014, our ongoing cost reductions are expected to offset any financial impact on our business."
This follows Dairy Crest's interim management statement from Feb. 7, which reported that it was on track to exceed its annual cost-savings target by delivering savings of about 23 million pounds for the year ending March 31 and that it had already identified several meaningful projects for the following year.
Chief executive Mark Allen commented: "We are delighted to have retained our Sainsbury's business. Our track record of making efficiencies allows us to supply our customers with competitively priced milk, pay our farmers a fair price and move toward our medium-term target of 3% return on sales in our Dairies business."
Elsewhere, Dairy Crest also announced its intention to consolidate its organization into a single structure, focused on consumer-driven growth with an integrated supply chain. This is to enhance its long-term strategy to "build added value sales and drive efficiencies" and is expected to save annual costs of at least 5 million pounds.
Additionally, finance director Alastair Murray is leaving to pursue "other business interests" and will be replaced by Tom Atherton, who has been Dairy Crest's director of financial control for the past four years and has worked for Dairy Crest for seven years. Murray has played a major part in the simplification of the business -- including overseeing the sale of its stake in Yoplait Dairy Crest in 2009 and the disposal of its French spreads subsidiary, St Hubert, last year -- and, notably, in reducing exposure to future pension-scheme risks.
Shares in Dairy Crest lifted 2.9% on the news today to reach a five-year high of 433 pence.
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