Milk competition hits Wiseman profits

Shares in Robert Wiseman Dairies slumped to a 52-week low yesterday (16 September) after the company warned that supermarket price competition and extra capacity by rivals would hit profits.

Wiseman said that although its overall milk sales had grown by 8.5% since last year, “intense” competition in the sector meant that operating profits would be down by around £7m in the second half of the year to 2 April 2011.

Assuming no improvement in margins or volumes gains, profits could be hit by £16m next year, it said.

In reaction to the news, RWD’s share price fell by almost one-third yesterday to close at 342p, and had made only a slight improvement of 3.90p this morning (17 September).

“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,” a statement said.

“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.”

The company said plans to install the final element of capacity at its Bridgwater plant in Somerset were progressing satisfactorily and the dairy would have an annual capacity of 500m litres available from November 2010.