DAIRY Crest, the owner of Cathedral City cheese and Clover margarine, has warned over the soaring cost of butter, which it says will put it under pressure this year.
The cheese and spreads maker said cream prices, which determine input costs for its butter business, have risen "substantially" during the first quarter.
As part of efforts to mitigate the impact, Dairy Crest has reduced promotional activity on its Country Life brand, which is adversely impacting volumes but "mitigates some of the margin pressure".
Despite this, the firm said trading in the first quarter was in line with expectations and the outlook for the full year remains unchanged.
Combined sales of Dairy Crest's four key brands - Cathedral City, Clover, Frylight and Country Life - are 7 per cent ahead of the same period last year.
Cathedral City sales volumes are up 15 per cent compared with last year.
Chief executive Mark Allen said: "The year has started well and our branded business has delivered good growth in the first quarter.
"The functional ingredients business continues to progress well and new customers are being signed up. We still expect that the profit contribution from this business will be second-half weighted.
"Dairy Crest is well positioned for long-term, sustainable profit growth.
"Despite the pressure on butter input costs, the strong performance of our cheese business means that our expectations for the year remain unchanged."
