Dairies set to report strong profits

Arla Foods UK and Robert Wiseman Dairies are the latest dairy companies to release upbeat trading statements, despite recent farm gate price cuts.

It follows news from Dairy Crest last week that it would hit year-end profit targets, forecasts to be around the £67m mark.

Both Arla and Wiseman say they have shored up margins by curbing cost increases and pushing through retail price rises.

Analysts at Oriel Securities predicted Arla would report pre-tax profits around £28m, on higher sales of £1.32bn, and upgraded the stock to a buy rating.

Wiseman was also expected to perform well in 2005, with pre-tax profit hitting £25m on sales £490m. Its stock rating was also upgraded.

Both companies have made significant cuts to the price they pay farmers for raw milk this year in an effort to control costs.

Arla’s dedicated Milk Partnership now supplies 75% of its milk. It said brands like Anchor and Lurpak spreads grew last year to take one fifth of the market.

And liquid volumes supplied to supermarkets were 3% ahead of last year, largely driven by sales of the extended-life Cravendale brand.

Wiseman also reported milk volumes ahead of forecasts while turnover was just satisfactory.

It hailed efficiencies from the build up of distribution volumes at its new £8m depot at Raunds, Northants, which opened last November.

And the company also confirmed speculation that its planned dairy near Taunton, Somerset, would be capable of processing 200m litres a year.