Graham’s sales surge but rising costs bite

SOARING costs are taking their toll at Graham’s The Family Dairy, which has posted a 43 per cent plunge in profits in its latest set of accounts.

Despite a near-20 per cent rise in sales to £49.6 million, pre-tax profits for the year to 31 March fell to £604,000. That was down from the previous year’s record, when Graham’s breached the £1m profit barrier for the first time.

The company blamed competitive pricing and the rising cost of commodities such as fat and fuel, which factor heavily into the production, packaging and distribution of its milk and other dairy products. Managing director Robert Graham – grandson of the company’s founder – cautioned that these pressures were unlikely to ease.

“It is anticipated that market conditions over the next year will continue to be challenging, though Graham’s The Family Dairy is confident we are well placed to further consolidate and develop our presence in the sector,” he said.

The financial year included the September 2010 acquisition of Claymore Dairies of Nairn. Graham’s subsequently invested an undisclosed sum to get the struggling operation on a firmer footing. The company also bought two smaller milk operations in Glasgow, and invested in the £1.2m extension of its Airthrey Kerse dairy in Bridge of Allan. That project, supported by a £175,000 grant from the Scottish Government, allowed Graham’s to launch its new line of spreadable butter in June.

In addition to acquisitions, Graham’s secured new business during the year to March via contracts with NHS Scotland and the Scottish Prison Service. New listings with David Sands, the Co-op and Aldi were added to the list of multiple retailers such as Tesco, Sainsbury’s and Asda that stock Graham’s products.

Since the close of the financial year, Graham’s has won additional listings with Wholefoods Market in Giffnock and Morrisons supermarkets in Scotland.

The family-owned business, Scotland’s largest independent dairy, has been expanding its board of directors to include its first non-executive, Cairn Energy chief executive Simon Thomson. In August, the company announced the promotion of Shaun Dorrian to operations director, with a seat on the board.

“Though a successful, award-winning family business, Graham’s has not been immune from cost pressures, including competitive pricing in the dairy category,” the managing director added. “However, sales growth suggests discerning customers continue to seek out the reassurance of buying high quality, great tasting dairy products.”