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Dairy Crest Rises to 18-Month High on Prospects: London Mover

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Dec. 18 (Bloomberg) -- Dairy Crest Group Plc, the U.K.’s biggest milk and cheese producer, rose for a fifth day in London on prospects of improved profitability in 2013 and acquisitions of branded food products.

The shares gained 1.7 pence to 393.2 pence at the close in London, matching the longest rising streak in two months. Dairy Crest has advanced 11 percent since it said Nov. 8 that it was ahead of its annual cost savings target of 20 million pounds ($32.5 million).

The maker of Cathedral City cheese completed the 430 million-euro ($569 million) sale of its French-based St Hubert spreads unit in August. It hasn’t yet spent any of the proceeds, which it said would be focused on acquisitions in the U.K.

“They have won a few friends by being cautious redeploying some of the money from the sale of their French business,” Charles Pick, an analyst at Numis Securities Ltd with a buy rating on the stock, said in a telephone interview. “Their dairies are showing signs of improvement off a dire base.”

Dairy Crest, based in Esher, England, trades 47 percent below its peak reached in July 2007. The shares are still trading at a 14 percent discount to other medium-sized U.K. food producers, Damian McNeela, an analyst at Panmure Gordon & Co. with a buy rating on the stock, said in a telephone interview.

“People got very concerned about the level of profitability within its dairies division earlier in the year,” McNeela said. “It still looks reasonably cheap versus the rest of the sector.”

Dairy Crest might consider returning to the yogurt business, after selling its 49 percent stake in its Yoplait venture in 2007, according to Pick.

The company, the U.K.’s only publicly traded dairy firm, is targeting a 3 percent margin on milk sales. It may be willing to end some supply contracts with customers including schools, hospitals and caterers to maintain profitability, Pick said.

More than 255,000 shares were exchanged today, or 11 percent more than the three-month daily average

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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