Robert Wiseman Dairies Share Discussion Threads

[conk] 28/2/2011 20:37

i would love to have hindsight with this share,how much darn lower will they take it?

[masurenguy] 28/2/2011 13:58

I don't think milk brands have any significance at all, unlike cheese and other dairy products. Fresh milk is supplied in categories of regular, semi-skimmed or skimmed and this, together with the retail price, are the key factors where the consumer choice is concerned.

Fresh milk is just a commodity and production capacity, cost, distribition and wholesale price are the key metrics. RWD scores strongly on all of these and is best placed to weather the current supermarket milk price war and escalating oil costs than either of its two main competitors, who collectively control over 80% of the UK market.

[1fox1] 28/2/2011 13:08

The problem with these is that they have very little pricing power vs competitors due to a lack of brand-focus, so this really is a commoditised share in every sense.

If you compare them to a competitor such as Arla or Dairy Crest, which has brands such as Cathedral City, Frijj, etc and a coherent strategy on B2C (milknmore), you begin to build up a picture of where their problems lie.

There's plenty of capacity in the Dairy industry, and with a lack of pricing power these will suffer more than most. In fact, they seem keen to perpetuate a price war as they obviously believe they have better operational efficiencies and a stronger balance sheet than most. So my guess is that profitability will probably recover mid-term as competitors leave the market. However, that doesn't really leave a catalyst to buy the shares today, other than a short-term trade relying support at £3.

[muffinhead] 24/2/2011 23:02

its the dairy output price that needs to change

is there an issue of overcapacity in the UK dairy industry ?

if you run plastic and oil costs (up 10% in 3 mths mentioned in recent rns...today Brent crude $120/barrel) into recent results and the margin knock due to supermarket pricing, I guess-timate there is not much profit on turnover at present

At some stage input pricing has to pass through to the consumer but its recovery of profit margins that will require a decent price hike

[kiwi2007] 24/2/2011 20:15

The price of dairy (milk) products are rocketing in international markets due to demand and production costs, which are mainly fertiliser and 'energy'.

[salpara111] 24/2/2011 16:54

Cant make my mind up on this one.

Now at my target share price 300p but every food manufacturer is announcing how they are getting absolutely clobbered by dramatically rising input costs but unable to recover them under their current pricing regimes, britvic is the latest to make an announcement on those lines today.

The divi here is nice and should still be payable next year so a nice yield.

I think I will just monitor for the time being and maybe get in later in the year if we see a cooling off in oil prices etc.

[chrisb1103] 21/2/2011 23:02

I've looked at this, wondering whether the quality associated with RWD is really worth investing in - at this point - they've been a great co to hold in the past it's true. However, as EPS is forecast to fall by 20% this year and next I'm not sure now is a good time to pick up shares on the cheap here.

Eps of 37.29p for y/e 31/03/11 puts them on a pe of around 8.5 at current share price However, forecasts are for eps to fall to around 29p next yr so a fwd pe of around 10.5. That suggests the share price could have further to fall imo. A relatively safe yield at around 5.5% however is attractive but not at the expense of loss of capital - who wants to look at a widening loss and wondering where the bottom is? With profits not forecast to start growing again until 2012/13 i'd say there are better opportunities elsewhere myself, just don't see a driver for the share price here. They may do better than forecast of course, hitorical support around 300p might hold, it has defensive qualities which might appeal but all this is a risk... chart doesn't look good, follow the trend i reckon and it currently isn't up.

[bostonborn] 21/2/2011 18:19

I have just made my first purchase of a few shares in RWD. They look to be a very solid company paying a good reliable dividend; expertly managed, with the share price hopefully close to a low point. Having said that I'm not sure where the future growth is going to come from at this point in time; however I'm happy to trust the past track record of the management and give them at least a couple of years and see what develops!!! Who knows they might diversify into other products or they could buy up Dairy Crest, if they ever get the opportunity!!!

[terzoalan] 21/2/2011 13:13

Sentiment is bad, but if it was better the price would also reflect that. I bought at 323 quite recently and, rather than speculate on what might or might not happen, I'm happy holding for the long-term and collecting the dividend while it's at this level.

[haywards26] 17/2/2011 12:21

Interesting and positive article. But I still struggle to see any drivers for increased share price appreciation currently.

The current rising inflation alongside job cuts and generally stagnent wages the UK are ingrediants for a tough economic market place in which to be operating, especially when cutomers are large (powerful) supermarkets, who are in price battles and trying to squeeze every possible pence out of their costs.

[masurenguy] 17/2/2011 08:43

Robert Wiseman: A modern milkman with a lot of bottle
Location, location, location is the key to the dairy business, the Robert Wiseman chairman tells Sarah Arnott

Robert Wiseman is not the kind of dairy company that has its own herds. The nearest thing to an actual cow at Bridgwater is the distinctive black-and-white Friesian pattern on the endless lorries to-ing and fro-ing in the loading bays. In fact, the only sign of the product at all is the faintest tang of dairy in the air. The plant is a network of gleaming tubes, vast machines and fast-moving conveyor belts, processing around 10% of Britain's daily milk consumption and about 9 million litres every week.

By a coincidence of lead times, Bridgwater is at full whack just as the dairy industry is facing more than usually straitened times. The pressures in the food industry are always the same, with supermarket customers on one side fighting to keep their prices down, and volatile global commodity markets threatening a spike in costs on the other. The difference at the moment is in intensity. Steadily rising oil prices – sent to more than $100 this month by the political crisis in Egypt – are a double hit for Robert Wiseman, the 1,500-strong truck fleet and plastic bottle requirements adding £8m on to the company's costs with every $10 rise in the global price. Meanwhile, two of the biggest supermarkets, Asda and Tesco, have committed to permanently lower milk prices, with the rest expected to follow. And soaring farm-gate prices have seen both Robert Wiseman and rival Dairy Crest increase their payments to farmers from the start of next month. "It is particularly ferocious at the moment," Mr Wiseman admits in a broad Glaswegian accent. "There are 60 million people in this country, and they are all looking at what they are spending their money on."

Robert Wiseman dairies is already feeling it. Since floating on the Stock Exchange in 1994, massive expansion plans have seen the company's market share rocket from 2% to 32%, with financial results to match. But last September, the group warned that this year's profits will be down by £7m, and next year's by £16m, wiping nearly a third off the share price in a single day. "It's disappointing to see profits fall, of course," Mr Wiseman says. "As consumers find things tougher, our big retail customers try to buy better, and as they fight for share of a very competitive industry we are caught in the backlash."

But the dairyman is far from gloomy. "We've got to get in there and compete," he says, with genuine relish. "We're still making money, we're very efficient, we've got a committed workforce, and we really are quite good at what we do." There are some tough decisions to be made. As part of an organisation-wide efficiency plan, some 3,000 projects, from mobile phone contracts to fleet procurement, are under the microscope. And two of the company's smaller facilities – one dairy and one depot – are under consultation with a view to possible closure. "When you come under pressure then you sit at the board meeting and say there are no sacred cows," Mr Wiseman says. "No decisions have been made yet but we've got to look at these things."

When the company listed in 1994, the family used the £14m raised to pay off their mortgages and set about turning the local doorstep-focused milk company into a national titan supplying shops. The first stop was Manchester – "because our drivers could get there and back in a single shift" – then Leeds, then south again to Wolverhampton and Droitwich. Now, 17 years later, Robert Wiseman has seven dairies and 14 distribution depots, from Aberdeen to Pensilva, in Cornwall, all carefully located along a spine running between the milk-producing lands of the west and the motorways connecting them to the rest of the country. It was a canny move, establishing the most modern dairy network in Britain. And at £480m in capex, it has not been cheap. But the Wisemans used profits and capital raisings to fund the expansion, leaving the company in good shape now, even with the recent profits warnings. While rivals are feeling the pinch from vast debts, yawning pension deficits, and outdated facilities dating from the monopolistic days of the Milk Marketing Board, Robert Wiseman has modest debts, an obsession with efficiency, and Bridgwater.

The new dairy is not just big. It is also green and highly efficient, part of the company's five-year programme to its environmental impact on measures covering everything from fuel consumption to landfill waste to bottle design. The biggest innovation at Bridgwater is the on-site effluent treatment plant that cuts water usage by 200,000 litres every day – a scheme with potential to be rolled out in the group's other facilities if it proves effective. This is no marketing gimmick, this is pure business, Mr Wiseman stresses. "The environmental targets are not some fluffy bunny idea," he says, almost angrily, pointing out an empty acre of land behind the Bridgwater boiler house which would have had a biomass electricity station on it, only the company could not make the economics add up. "If we get it right then it will pay us, but the payback has to be there," Mr Wiseman says. "Environmentalism will only work if it is good for shareholders."

Alongside the issue of running costs, turnaround time is vital. The milk goes from cow to factory in less than 24 hours and will be pasteurised, separated, bottled and shipped within another 48. Mr Wiseman likes to describe the company as a logistics business that happens to deal in fresh milk. In such trying times, such a focus on efficiency, and modern facilities like Bridgwater, are a central competitive advantage, he says. "Operators with old dairies are less efficient, they are built the wrong way and in the wrong places," Mr Wiseman says. "The industry has got to go forward, it's survival of the fittest, and we're in a great position."

[salpara111] 30/1/2011 17:59

Well, the management statement was enough to keep me away.
My main takeaway was...rising costs and squeezed margins and I think we can be reasonably confident that the supermarkets are not going to role over and pay more.
I will keep an eye on this but clearly there is little here to ignite the share price

[haywards26] 29/1/2011 15:36

Am still keeping an eye on RWD. A couple of interesting articles, sentiment is still on the downside IMO. Having a high dependancy on Tesco is also a worry, as they very rarely have good press in regards supplier relations/tactics;

Will continue to watch.


Redundancies at Devon depot




Fife depot under consideration going forward




Increasing costs, revenue squeeze. interim review

[muffinhead] 28/1/2011 18:32

8 pints for £3 until October from Sainsbury

[krayzeeaaron] 26/1/2011 13:30

Okehampton site to close end of February!

[masurenguy] 17/1/2011 08:52

Clear, rising trend seems to be developing over the past 6 weeks with higher highs and higher lows and the price has gradually crept up by nearly 10% during that period.

I think that we saw the bottom at circa 315p back in October and this would appear to be on track to gradually recover over the course of this year. The year end trading statement is due at the end of March.

[timbo003] 30/12/2010 17:00

Masurenguy

Agreed, Wiseman has incredibly low gearing, although some investors (like myself) might think it a bit too low, as a bit of borrowing is tax efficient and also a geared balance sheet is generally a good thing if inflation is picking up (which it appears to be doing).


According to the last RWD annual report (page 9)...

....milk volumes were roughly equal for the big three, i.e. Wiseman, Dairy Crest and Arla. So I'm not entirely sure what you mean when you say that they have "more capacity than anyone else".

Another minus in the DCG vs RWD equation (from my point of view), is that there is probably a zero chance of a takeover of Wiseman, the family hold far too many shares, whereas this is certainly not the case for Dairy Crest, where Muller have just declared a notifiable interest.

Whatever, having said all that, Wiseman are definitely on my short list of new shares for my ISA, I have £4.5K divis coming into the ISA in January, so I may well take a maiden stake towards the end of Jan assuming nothing fundementally changes between now and then.

[kiwi2007] 30/12/2010 11:57

I wonder whether the recent pullback in the price was related to RWD having difficulty collecting milk during the bad weather.

Anyway, like the dividend, which they seem to increase year after year, plus the lack of debt - one to tuck away in the SIPP - IMO of course.

[masurenguy] 30/12/2010 09:28

Jon - I'm looking for RWD to move back above 450p again - it is only a matter of time in my view - it may take a further 12/15 months but in the meantime there is a solid dividend yield at the current share price.

timbo - I also looked at DC since they are more diversified both in terms of customer and product mix and have slightly higher net margins too. DC are principal milk suppliers to Asda and Morrison and no customer exceeds 10% of their overall sales. RWD major with Tesco, Sainsbury and the Co-Op who collectively account for circa 60% of their sales. Whilst this might make them appear vulnerable on the surface, the other side of the same coin is that they are a dominant milk processor with much more capacity than anyone else and therefore hold some strong cards too in the overall milk market demand - supply paradigm.

RWD also have a much stronger balance sheet with net debt of just over £20m while DC remain highly geared with net debt of more than £300m. In the current climate I feel much more comfortable holding RWD !

[jwe] 30/12/2010 08:50

Mas
Had a look over these and quite like them.Would be surprised if there was not a 25-30% turn over say 12 months as a conservative figure.Have added to my watchlist.FWIW many years ago i had a rather good run with Express Dairies
Jon

[timbo003] 29/12/2010 16:01

I looked hard at this one back in September:

I liked the over reaction to the mild profit warning in September, they have good long term contracts and pay a good divi which is reasonably well covered and milk does not seem to have followed other soft commodities up (yet!)

I opted instead to go into Dairy Crest (DCG)



They have a nice well covered divi, and (unlike RWD) they have lots of high margin brands (Cathedral City, Utterly Butterly etc). Furthermore, rival Muller (as in Muller lite yoghurts) have recently declared a 3% stake and they probably know more about the value of Dairy Crest than I do.



Dairy Crest seem to have less final salary pension worries compared to Wiseman, which is also a comfort.

[salpara111] 29/12/2010 15:00

Problem with this recent rise is that there did not appear to be decent volume driving it.
I am happy to wait until the next market update to see if it is worthwhile taking a stake.
Having said that, there appears to be some letup in the supermarket promotions, just have to wait and see if it feeds back through into margin improvements.