Dairy Crest, the UK dairy processor based in the southeast of England, has said that butter markets remain challenging due to historically high butter prices. Announcing half-year results, Dairy Crest said commodity butter prices have fallen 25% in the last year when spot market prices spiked to record levels above €7,000/t.

However, the UK company says butter prices today are still 25% above where they were two years ago and butter is now its lowest-margin product. In its half-year results, Dairy Crest said sales of butter are down 14% in volume terms, while sales are back 4%.

However, with butter prices soaring in recent years, Dairy Crest is seeing more UK consumers switching back to cheaper dairy spreads. Sales volumes of Clover, which is Dairy Crest’s branded spread product, grew by 8% in the first half of the year. In comparison, Dairy Crest’s butter brand Country Life saw sales volumes collapse by 16%.

In the six-month period to the end of September 2018, Dairy Crest saw pre-tax profits rise 14% on last year to £22.7m (€26m). Sales for the period increased slightly (+2%) to reach £225m (€259m), principally driven by higher sales of cheese and dairy ingredients.

Operating profits for the six month period increased 3% to just under £26m (€30m) as profit margins widened marginally to a very strong 11.4%. Dairy Crest reiterated its plans to push ahead with an £85m (€98m) expansion of its Davidstow cheese facility to increase production capacity from 54,000t per year to 77,000t.