Shares in UK milk supplier Robert Wiseman Dairies fell today (29 September) amid uncertainty whether it can recover profits.
They fell 0.9% to 304.75 pence at 14:36 BST after the company issued a trading update announcing that recovery of increases in milk costs is a priority.
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Analysts in the city said first-half profits are likely to be lower than the same period last year, on the back of increasing prices, and therefore leaving “little opportunity” to increase volumes.
“We anticipate that 1H 2012 PBT (profit before tax) will be half to GBP10m as a result of reduced margins on major supply contracts to retailers and ongoing input cost pressure,” analyst Damian McNeela said.
The trading update reported pressure on costs remains, including the increase in farm-gate milk prices as well as oil-related costs and the resin used to produce plastic bottles, which have increased by 15%. However, bulk cream prices have helped to offset increased fuel and plastic costs.
Robert Wiseman Dairies increased the amount paid for its milk supplies to its Wiseman milk group members to 1.85 pence per litre, from 1 October.
“The increase in milk costs noted above is necessary to secure our raw milk requirements and recovery of these costs is critical for sustaining supplies. We are currently in discussions with customers with a view to recovering these higher costs,” the company said in a trading statement today.
However, the company said sales volumes benefited from additional supplies to The Co-operative Group. Cash flows have remained positive during the period the company said, and its financial position is “strong”.
Wiseman said it expects its half-year results for the six months to 1 October to be “in line with expectations”, but recovery of these costs is “important to maintain margins in the second half of the year”.
The company will announce its half-year results to 1 October on 14 November.
