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Dairy Crest to invest £85m to expand cheese production capacity

FBR Staff Writer Published 24 May 2018

Dairy Crest has revealed its plans to invest £85m to expand its cheese production capacity to cope up with the increasing demand for mature cheddar cheese in Europe, the US, China and the Far East.

The British dairy producer said that there could be capacity constraints for cheese production at its existing facility at Davidstow in Cornwall.

To address this, Dairy Crest is looking to grow its cheese production capacity to up to 77,000 tonnes per annum from the current capacity of 54,000 tonnes per annum.

The dairy company also expects its whey production to grow proportionally.

Dairy Crest said that it will carry out the expansion program in a phased manner over the coming four to five years.

In the first phase, the company will look to make process changes to streamline its existing capacity followed by increasing its pasteurization capacity and installation of two new vats in phase 2.

In the third and fourth phases, it will replace existing vats while improving its cheese packing.

In the fifth and final phase of expansion, Dairy Crest plans to upgrade its cheddar-making machine while introducing new block formers.

To execute its plans to increase its cheese production capacities, Dairy Crest said that it will raise funds by carrying out a non pre-emptive cash placing to institutional investors of up to 14,107,224 new ordinary shares.

The price will be 25p per share in the capital of the Company, representing nearly 9.98% of Dairy Crest’s current issued share capital, at a price of 495p per placing share.

In a statement, Dairy Crest said: “By obtaining the proceeds at the outset, the Company has flexibility to adjust the pace of, and consequently expenditure required to effect, the expansion in line with purchasing requirements for new equipment as well as demand growth.”

The UK dairy firm also released its financial results for the year that ended 31 March 2018 in which it reported a revenue growth of 10% to £456.8m. Revenue of the company's cathedral city cheese brand surged by 6%.

Image: Packing of Cathedral City cheese. Photo: courtesy of Dairy Crest.