Wiseman warns on profits

In a trading update, Wiseman reported that milk sales had grown by 8.5% in comparison to the same period last year and it remained confident that sales volumes for its financial year to 2 April 2011 would be in line with expectations. However, it added that as a result of recent intense competitive pressures across all sectors of the market operating profits will be impacted. While anticipated volumes for the year remain unchanged, operating profits will be impacted by around £7 million in the second half of the year to 2 April 2011 and, assuming no improvement in margins or volume gains, by approximately £16 million in the full financial year to 31 March 2012. The market update statement said that the reduction in anticipated profit was "very disappointing", but Wiseman believes it is 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," the statement continued. Financial performance also continued to be impacted by volatility in oil related costs, which had remained higher than at the same time last year. While fuel costs had eased, the cost of plastic had not declined by the same level. Nevertheless, the higher oil related costs incurred were mitigated by the contribution from higher cream revenues, which have exceeded those generated in the same period of last year. These higher returns also helped support an increase in the price paid for raw milk supplies from August. Plans to install the final element of capacity at the company's new Bridgwater dairy were progressing satisfactorily and the dairy will have a total capacity of 500 million litres per annum available from November 2010. "Further to this, we will have a dairy and depot network in place to allow the medium-term target of 2 billion litres of sales to be met," Wiseman promised.