Dairy Crest shares hit by higher taxes and charge

By Chris Wills

LONDON (Reuters) - Dairy Crest Group (DCG.L), Britain's largest maker of dairy products, said it should meet forecasts for underlying annual profit, but news of higher tax rates and an exceptional charge hit its shares on Friday.

Dairy Crest also said it will likely have to again increase the price at which it sells milk and dairy products to offset rising energy and ingredients prices.

It has raised the price over the past 12 months to offset a big increase in the cost of milk from farmers.

At 4.10 p.m., shares in the maker of Cathedral City cheese and spreads Utterly Butterly and Clover were down 9.6 percent to a 20-month low of 479 pence.

"We may need to edge the prices up over the coming months. We don't anticipate it will affect our margins in a negative sense," Chief Executive Mark Allen said. He did not say how much any price increase would be.

Numis analyst Ian Kellett said increases in supermarket prices could allow Dairy Crest to boost its margins.

Global food prices have leapt as energy costs surge and more land is used for biofuels instead of food, and as emerging economies lap up dairy products and meat. British food prices rose 5.6 percent in the year to February, latest data showed.

The cost of grain to feed cattle has risen as farmers use land for biofuels, pushing milk prices up about 40 percent in the past seven months, a Dairy Crest spokeswoman said.