Shares in Robert Wiseman Dairies tumbled by almost a third this morning (16 September) after the UK milk processor said “intense” competition would hit its annual profits.
Robert Wiseman Dairies’ stock was down 29.6% at 342p at 08:40 BST this morning following a trading update that warned profits could fall by as much as GBP7m (US$10.9m) in second half of its current fiscal year – and by GBP16m in the next financial year.
Looking at the 23 weeks to 11 September this year, the company said milk sales were up 8.5% and added it was “confident” volumes for the year to 2 April 2011 would be “in line with expectations”.
However, Robert Wiseman Dairies was less upbeat about its expectations for profits.
“We anticipate our financial performance in the first half year will be broadly in line with expectations. Going forward, however, as a result of recent intense competitive pressures across all sectors of the market operating profits will be impacted,” the company said.
“Whilst anticipated volumes for the year remain unchanged, operating profits will be impacted by around GBP7m in the second half of the year to 2 April 2011 and, assuming no improvement in margins or volume gains, by approximately GBP16m in the full financial year to 31 March 2012.”
Robert Wiseman Dairies said “volatility in oil-related costs” was affecting its financial performance as the cost of plastic had not declined at the same level as fuel costs. However, higher cream revenue had helped Robert Wiseman Dairies increase the price it pays for raw milk in August.
The milk firm added: “The reduction in anticipated profit is very disappointing, but we believe we are best placed within the dairy industry to manage the impact of a highly competitive trading environment going forward. We recognise the importance of continuing to seek to improve efficiencies across our operations and eliminate costs where possible, with a view to rebuilding future margins to a more acceptable level.”