Robert Wiseman Dairies Share Discussion Threads

[muffinhead] 06/7/2011 21:54

Todays AGM/Interim management statement was helpful enough to scramble some shorts for big volume day

[randomwalker] 06/7/2011 14:27

Very tidy rise today; presumably in anticipation of the dividend. Given that interest rates are unlikely to rise in the foreseeable future, and that it is adequetly covered, I can see demand for these even after XD

[muffinhead] 05/7/2011 00:32

9/6/11 Tesco moving up price of milk

[muffinhead] 05/7/2011 00:10

started new thread as header on old thread not maintained...current header is low maintenance with links to sources that provide updated info

I like this company because it is well run, good balance sheet, major player in its market, sells a product that is essential...it is a food company but also reminds me of a water utility company with good cash flows

[muffinhead] 04/7/2011 16:45

fresh milk prices ticking up



Milk products (cream price increases already highlighted in recent final results)

[hazelton] 17/6/2011 18:50

Odd as it seemed to be quite strong against the market in these recent drops.

[ydderf] 17/6/2011 17:53

but it might be worth bidding in Mondays opening auction to steal a bit of cheap stock....

[kiwi2007] 17/6/2011 17:46

Yes - it's not a real drop. ignore it.

[the other kevin] 17/6/2011 17:23

Any views on today's late price drop, please?

[paulbl] 03/6/2011 11:34

Ydder

I agree this will have to change as farmers and processors alike will not be able to run indefinitely at the current prices. Contracts will be renegotiated and RWD will get back to where it should be. The fact they are paying the same div for me says they fully expect this to be the case.

[ydderf] 03/6/2011 08:32

people will drink and buy milk, it is inelastic and there are no substitutes, therefore it will only be supplied at an economic rate of return for the suppliers - sooner or later - otherwise supplies would cease

[masurenguy] 03/6/2011 08:18

Recent broker views !

In the spotlight: Liquid milk proves sour spot for UK dairies

Two of the UK's largest dairy companies - Robert Wiseman Dairies and Dairy Crest - delivered their annual results this week and a comparison between the two makes for some interesting reading. Robert Wiseman reported a near 30% plunge in profits as its liquid milk business was hit by poor trading conditions, while Dairy Crest showed the benefits of being a broad-based dairy firm, delivering a 5% increase in profits. Katy Humphries takes a closer look.

Shares in Robert Wiseman Dairies took a not-unexpected hit this week, falling from an opening price on Monday (16 May) of 325p (US$5.27) to an opening price on Friday of 320p as investors reacted unfavourably to the news that profits at the group had dropped by 24% in the 12 months to 2 April. Robert Wiseman is one of the UK's premier milk suppliers. The company primarily supplies private-label milk to supermarkets as well as milk under its own brand. Currently, Robert Wiseman accounts for over 30% of the fresh milk consumed in the UK market.

While the group is a powerhouse in UK liquid milk, its distinct focus has left it subject to the swings of overall trading conditions in the sector, placing profitability under considerable pressure over the last fiscal year. Profits at the company plunged despite a 3.5% increase in turnover, Wiseman revealed on Tuesday. Wiseman has found itself squeezed from both sides. On the one hand, rising input costs are forcing up the cost of goods sold, while on the other, the competitive market is making it tough to pass costs down the supply chain. Over the past 12 months, input costs have been driven up by higher fuel, oil and milk prices. Oil-related costs rose 20% year-on-year in fiscal 2010-11 while diesel costs rose by 13% in the same period. Meanwhile, the price that Wiseman pays its suppliers for raw milk increased to 26.72p per litre in this month, versus 24.32p per litre in May 2010.

However, according to Julie Macleod, senior analyst with industry group DairyCo, the cost for farmers to make milk currently stands at around 27-29p per litre. And, despite Wiseman upping the price it pays its farmers, McLeod indicates that the cost pressure on processors could continue to rise. "Fuel, fertiliser and feed costs have all increased double-fold since last year, and these costs account for more than 50% of dairy farmers costs," Macleod tells just-food. "The knock-on effect is that some producers are going out of the industry, raising a concern over continuity of supply. Processors must offer competitive conditions to secure supply." On the demand side, the story is a familiar one - while Wiseman was able to grow revenues by increasing volumes, its value sales suffered. Milk is often used as loss-leader by Wiseman's key customers - supermarkets - meaning that the company has to an extent been caught in the crossfire of the intense retailer competition the UK has witnessed over the past year.

This trend can be noted in the wider UK liquid milk category. According to data from DairyCo, during the 52-weeks ended 17 April, total milk sales volumes increased by 2.2% year-on-year while total sales by value fell by 4.7%. "The multiples and middle market are pressuring to bring the price down, with processors sitting in the middle," Macleod suggests. "You have this predominance of retailers who are setting a price that makes it difficult for processors and farmers to operate profitably." The result is that margins at Wiseman took a considerable hit in the last fiscal year. Operating profit fell by nearly 30% and the group's return on sales fell by a considerable 180 basis points to 3.9% during the period. And, according to Shore Capital analyst Clive Black, things do not look set to get better for Wiseman in the coming year. "Continued input price pressure, both from oil-related and farm based costs, leads us to downgrade our expectations once again for Wiseman's financial out-turn for fiscal 2011-12," Black says.

In contrast, fellow UK dairy major Dairy Crest this week demonstrated the benefits of being a broad-based dairy business, as it was able to offset rising costs and a weakness in liquid milk with a strong performance from its cheese and spreads units. Dairy Crest's liquid milk business saw annual operating profit tumble 22% in the year amid higher costs and heightened competition. "A very competitive market has put pressure on this side of the business," CEO Mark Allen said. While sales at the unit increased 1%, like Wiseman, gains were driven by higher volumes to the UK's retail multiples - which were up 9%. In a bid to improve fluid milk profitability, the company said that it had increased its focus on the UK's supermarkets, while reducing sales to so-called "middle ground" customers, such as food service groups and smaller retailers. "Although some parts of the middle ground remain attractive, others have become increasingly commoditised and prices and margins have been adversely affected," the group said.

Like Robert Wiseman, Dairy Crest said that it also came under increasing pressure from higher farm-gate prices, with milk costs up by £40m a year. Other input costs also put a strain on margins, with spending on fuel, packaging and oil up by £25m. While the company's ability to push price increases through to its customers is constricted due to broader industry dynamics, Dairy Crest has made good progress in mitigating some of the higher costs through its efficiency drive. In its trading update, the company said that it delivered savings ahead of its £20m target last year and committed to achieving another £20m in cost savings in the year to March 2012. In spite of the difficult trading conditions faced by the company's dairies division, Dairy Crest was still able book a 5% increase in overall profits. According to Investec Securities analyst Nicola Mallard, the divisional split was "as expected", with "good progress" in Dairy Crest's foods unit offset by a reduced result from its dairies arm. Higher group profits were primarily achieved on the back of a 65% jump in operating profit at its cheese business, which overtook profits at its dairy unit for the first time. The company has invested heavily behind its brands and this paid off in cheese, where Cathedral City booked a sales gain of 6%, ahead of the 2% growth seen in the UK cheese market.

The outlook for the UK fluid milk category for the coming 12 months remains bleak, with little likelihood that either Robert Wiseman or Dairy Crest will benefit from a significant improvement in conditions. Nevertheless, Dairy Crest's ability to offset tough trading in this sector through its other units, its focus on investing behind its key brands and plans to strip costs out of the business leave it well-placed to continue to deliver profitable growth in the year to come.

[ydderf] 03/6/2011 07:51

this is a simple cash generative business with a stable end market, and reliably cyclical eps, as i see it, buying now at a low point in the cycle and relying upon reversion to mean eps, will provide a 60% gain over two years or sooner, input inflation cannot fail to be passed on unless people stop consuming milk products abruptly.......meanwhile you get nearly 6% while you wait......

have i missed something?

[muffinhead] 23/5/2011 19:45

2010/11 DCG increase 0.8% in milk revenue
Operating profit as percentage of total turnover (milk and cheese) 6%
? milk %

2010/11 RWD increase 3.5%
Operating profit as percentage of total turnover 3.8%

[haywards26] 23/5/2011 19:40

Interesting article contrasting the recent Wiseman and Dairy Crest results.

[little beaker] 22/5/2011 22:33

Competition: Dairy Crest reported results slightly ahead of forecasts on 19 May, cites the dairy business as a drag on profitability with growth in spreads and cheese.

I blame RWD for being too aggressive on price - what's wrong with them?

[salpara111] 20/5/2011 15:13

I shop in Lidl and Sainsburys and the price of a 2 litre carton has been at £1 and £1.25 respectively for 6 months or more now and sainsburys also seem to have and occasional 2 for £2 offer! I assume that the supermarkets are not taking all that hit out of their profit margins!

It could well be a year before this situation rebalances.

If we hit the £3 line I may tuck some away for a 1-2 year hold.

[muffinhead] 19/5/2011 21:35

Investec Securities and Numis Securities also downgrade 2012

[kiwi2007] 17/5/2011 19:47

Todays fall:

* Panmure cuts Robert Wiseman (RWD.L) price target to 260p from 360p and rates hold
* Peel Hunt cuts the dairy operator (RWD.L) target price to 300p from 310p and rates hold

[masurenguy] 17/5/2011 12:18

I completely agree - it just clogs up and ruins the thread.

Goldfeverrush - please edit post 249 to maybe just the opening financial and operational highlights. Anyone wanting to read the whole statement can click on the News link in the header.

[skyship] 17/5/2011 12:04

GFR - Normal practice is to post the highlights and attach the link. No need to clutter the thread with the whole shebang, which always distorts when posted.

Looks to me as though these could trend sideways in the 300p/360p range for another 6months. Certainly no hurry to board just yet...

Will keep them on my 2nd Monitor.