Wiseman Reports Trading in Line with Expectations

Robert Wiseman Dairies reports that trading is in line with expectations for the 25 weeks up to, and including, 24 September 2011.

During the period the East Kilbride-based dairy has succeeded in integrating a record new volume gain from a customer while continuing investment to further increase efficiencies and eliminate cost across the business.

Sales volumes have benefited from the start of the previously announced additional supplies to The Co-operative Group. This uplift, the largest ever single volume gain for the company, started in August 2011 and, as a result, Wiseman is now supplying all of the retailer's own-brand fresh milk requirements.

Bulk cream prices have remained strong throughout the period relative to the previous year, but they have eased from their peak in the first quarter of the financial year and the outlook with regards to cream prices going forward remains uncertain.

Volatility in oil-related costs continued during the period and, compared to the same period last year, the costs of diesel and the resin used to produce plastic bottles have both increased by 15%.

A trading update from the company states: "Both these costs remain higher than the levels being incurred when we last sought recovery of our increased costs from customers earlier in the year.

"In August we announced the third increase since February 2011 in the amount paid for milk supplies to our Wiseman Milk Group members. The 1.85 pence per litre increase will be effective from 1 October 2011.

"The increase recognises the continued strength of dairy-related commodity markets and higher on-farm costs experienced by our suppliers. In addition to the efficiency projects highlighted in previous statements, implementation of new Supply Chain Planning software has started and we will look to target savings through improved production scheduling and transport rationalisation.

"Our financial results for the six months to 1 October 2011 will benefit from a £1.0 million reduction in the amount payable to the Office of Fair Trading further to entering into an Early Resolution Agreement in December 2007 following its investigation of dairy retail prices. The revised settlement amount of £3.2 million will be payable during October 2011.

"Cash flows have remained positive during the period and our financial position is strong, with debt levels in line with expectations.

"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 recoveringthese higher costs.

"Whilst we anticipate our results for the six months to 1 October 2011 will be in line with expectations, recovery of these costs isimportant to maintain margins in the second half of the year.

"We will continue to invest in the business to seek higher levels of efficiency and eliminate cost to assist in steadily rebuilding our margins."

The company’s interim results for the period to 1 October 2011 will be announced on Monday, 14 November 2011.

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