Dairy Crest and Petra Diamonds

“There is a patchy start to the week for investors with London shares slipping and most of Continental Europe and Asia also in the red. The mining sector’s rally last week has proved to be short lived with Glencore, Antofagasta and Anglo American among the weakest FTSE 100 stocks on Monday. The only real bright spots on the UK market were utilities and telecoms,” says Russ Mould, Investment Director at AJ Bell.

Dairy Crest

“The value of a strong brand is reflected in today’s robust first half trading update from food producer Dairy Crest.

“Most UK homes wouldn’t feel stocked up without a block of cheddar in the fridge and a recent placing in the top 10 of a YouGov survey into the UK’s leading brands suggests the company’s Cathedral City brand is doing well.

“Despite the tough like-for-like comparison with 12 months ago, the company says this part of the business delivered ‘good’ growth, which translates in the eyes of most observers to a mid-to-high single digit advance in percentage terms.

“Dairy Crest is among several companies to attribute an impact on trading from this year’s unusual weather, citing the hot summer for reduced demand for its Frylight cooking oil.

“Management have also responded to high butter prices by scaling back promotion for its Country Life range which is hurting sales for this part of the business.

“A fundraise earlier this year supported an improvement in the balance sheet and the company is investing both in cheese production capacity and product development.

“Investors will be pleased to see the company is not sitting on its laurels as it looks to navigate any complications to its supply chain from Brexit.”

Petra Diamonds

“Johan Dippenaar, one of the longest-serving chief executives in the London-quoted mining sector, is to finally hang up his boots with Petra Diamonds after 13 years running the business.

“Much of his tenure has involved buying large diamond mines from De Beers and streamlining or expanding operations to give them a new lease of life. Sadly more recent times have been troubled with financial problems, resource nationalism issues and numerous profit warnings.

“Shareholders’ patience has been tested and the share price has understandably taken a big hit, resulting in a decline in valuation and Petra losing its place in the FTSE 250 index.

“Dippenaar has consistently asked the market to be patient in the belief that operational and financial problems would be resolved. Yet shareholders will only be patient for so long.

“A prolonged period of share price weakness will inevitably draw criticism from investors and such a situation typically raises questions about leadership and whether someone new is needed.

“The company attributes the management change to succession planning as Petra switches from development work to a focus on steady state operations.

“While that seems a reasonable explanation for the CEO change, one has to wonder if the timing of the announcement was spurred on by a very weak share price. Investors in such circumstance demand change when everything is looking bleak and one could speculate that Dippenaar has fallen on his sword.”

These articles are for information purposes only and are not a personal recommendation or advice.