Robert Wiseman Dairies Share Discussion Threads

[monkeywrench] 17/9/2010 11:14

Tim Steer has made this his first short.

[ian77] 17/9/2010 08:25

Thanks tesco every little helps!!!!!!!!!! more reasons to shop at morrisons.

[masurenguy] 16/9/2010 18:06

Robert Wiseman Dairies tumbles as supermarket price war hits profits

Robert Wiseman Dairies shares dived nearly 30% after warning intense competition from rivals would sap profits.

The Scottish group said it expects a £7m decline in operating profits in the second half of the year. For the full year, it expects a £16m fall - 32pc down on operating profits of £50.3m reported in the last financial year. Along with an increase in the number of small and mid-sized local rivals after the demise of co-operative Dairy Farmers of Britian last year, analyst said aggressive supermarket pricing was also affecting the Robert Wiseman business.

Asda, Britain's second-largest grocer, was the first to cut milk prices. Clive Black, analyst at Shore Capital, said: "Robert Wiseman has had to give into the pressure of retail discounting with a re-negotiation of prices, we believe the pressure has come from Tesco's response to Asda's discounting." Analysts fear the effects will be felt across the sector. "This is clearly very disappointing for shareholders and management alike and for the next six months there are no obvious catalysts which could change this," said analyst Nicola Mallard at Investec Securities in a note.
Robert Wiseman, which procures, processes and delivers milk a third of Britain milk, said it was focusing on boosting its margins and volumes while lowering dependence on fuel and plastics. The company plans to maintain a total dividend of 18p for full year after an 8.5pc growth in milk sales and higher cream revenue for the 23 weeks to September 11. Robert Wiseman shares were down 130.5 to 353p - a fall of nearly 27pc - by lunchtime.

[jab118] 16/9/2010 15:09

Okay here's a question for dispute,

If that trading statement was supposed to be a profit warning today, then why have Wisemans still decided in paying 18p divi?

I think the profits could be down to investment in building the Bridgewater plant up for future capacity.

[waldof] 16/9/2010 13:04

Still am, very very much so.

[twix386] 16/9/2010 12:22

waldof,

you're missed over on the Vialogy thread, if you're still invested??
Gone AWOL ;-)

[masurenguy] 16/9/2010 11:54

As I stated in post #61, the 'milk price issue' was covered in todays trading update and profit warning when they stated that production volumes will remain the same but that prices and profits would fall due to competitive pressure. Your link in the above post refers to the same issue.

You previously posted

spob - 16 Sep'10 - 53: I wonder if RWD is making up excuses to cover up somehing else

As I asked previously - what is the 'something else' you are alluding too ? Stop evading the question !

[spob] 16/9/2010 11:40

from Ft Alphaville markets live blog today


NH
the big news todayNH
is milkBE
It is indeed. Huge profit warning from Robert Wiseman.BE
Blaming competition.NH
milk warsNH
Asda cutting pricesNH
and Tesco followingNH
I'm kicking myself because someone pointed this out on MondayNH
and I had meant to mention itNH
not that I thought it would knock 30% of the share price of Robert WisemanRobert Wiseman Dairies PLC (RWD:LSE): Last: 353.50, down 132 (-27.19%), High: 370.00, Low: 330.10, Volume: 3.90mBE
Actually, I did make a couple of light enquiries about this yesterday.NH
andBE
As, conveniently, Dairy Crest had a big meeting for investors and scribblers.NH
they didBE
And the feedback was: "nope. Nothing happening here."NH
Foston visitNH
ActuallyNH
there's a note from RBS on thisNH
have a lookNH
just goes to show that when a management team saysNH
that won't affect usNH
or the slowdown won't affect usNH
because people will always need to drink milkNH
it's time to sellNH NH
No major surprises came out of the Foston site visit, but 'milk&more' looks to be
doing better than expected and there is as yet no profit impact from multiple
retail price competition on liquid milk. Prior to the 1H trading update at the end of
September, we reiterate our Buy recommendation and 440p TP.NH
here's the key bitNH
As has been widely reported in the trade press, the UK multiple retailers are currently heavily
promoting fresh milk. Dairy Crest management observed that retail prices are a matter for retailers.
Thus far, promotion has been most intense at retailers where the company has little or no
exposure. If milk remains a promotional battleground for an extended period, this could change,
but we believe promotions are so far having a minimal impact on Dairy Crest. Overall,
management's body language seems confident prior to the IMS expected at the end of this month.
We see the shares, on 8.2x FY11F PE, as cheap given the positive progress the group is making
across a range of fronts.BE
Oh dear.BE
Fast forward to today and RBS, who bear in mind are shop to Dairy Crest, are sending around this.BE
Dairy Crest*
Wiseman profit warning implications
Dairy Crest's shares have fallen 8% today in the wake of Robert Wiseman's profit
warning. While we understand the market's caution, we believe this is an overreaction,
as we believe trading remains on track and the risk to Dairy Crest's
profits is materially lower than is the case for Wiseman.
BE
Robert Wiseman profit warning
Wiseman this morning issued a profit warning, indicating that its FY11 profits are expected to be
£7m lower than it had previously anticipated, while its FY12 profits will be £16m lower, equivalent
to EPS reductions of 16% and 33% respectively. These have been attributed to the "recent intense
competitive pressures across all sectors of the market", a reference to the impact of the aggressive
promotional activity being undertaken by some retailers on UK liquid milk. However, we believe the
overwhelming cause of this profits shortfall is a reduction in its margins with Tesco, which accounts
for 50% of its major multiple volume, as a result of recent renegotiations. It had previously
successfully agreed terms with its other two major retail customers, Sainsbury and the Co-op,
hence it is reasonable to conclude that Tesco is entirely responsible for this profit warning.
BE
Readthrough for Dairy Crest
We believe Wiseman's problems should not impact Dairy Crest's trading performance. DCG does
not supply Tesco with liquid milk. In addition, earlier this year it reached a three-year supply
agreement with Sainsbury and negotiated a new contract with the Co-op, in total covering around
45% of the group's major retail milk volume. While the group is not in a position to discuss the
specific arrangements it has with its other key customers (Morrison, Waitrose and M&S), we do not
believe these carry any material risk to the group's profitability. In addition, Wiseman's profit
warning highlights the benefits of DCG's broadly based portfolio, with retail milk accounting for an
estimated 21% of operating profit in FY11 vs 100% for Wiseman. Hence we believe any profits
shortfall in DCG's retail milk business would have a materially smaller impact on group profits. By
way of illustration, a 33% fall in its retail milk profits in FY12F would lead to a 7% fall in DCG EPS.
BE
Weakness provides a buying opportunity
We can understand the market's nervousness here, but believe the forthcoming 1H update should
provide considerable reassurance re the group's prospects. A 2011F PE of 7.3x and well-covered
yield of 5.9% offers significant medium term upside.NH
24 hours is a long time in milkNH
and I don't follow the argumentNH
surely Sainsbury will followNH
and MarksNH
annd the restBE
True. The point of a defacto monopoly sector is that they all move together.BE
And, usually, the suppliers get crushed.NH
just back to Robert Wiseman for a momentNH
the back story here is that on MondayNH
Tesco matched Asda's promotion on milk
which reduced the price of a 4 pint poly from £1.53 to £1.25NH
equivalent to a 12ppl reduction in the shelf price, apparentlyNH
and that triggered today's warningNH
that operating profits this year would fall £7mNH
and a lot more next yearNH
anywayNH
this note from InvestecNH
broker to RWD sums it all upNH
Robert Wiseman has issued a trading update for the 1H10 period and whilst this
states that the 1H performance is in line with expectations, the outlook for the
second half is likely to be impacted by the results of recent competitive pressuresNH
Volumes across this process have been retained so we still anticipate the group
processing something in the region of 1860m litres this year, but intense
competition has resulted in lower selling prices and RWD expects this to impact
on FY11E profits to the tune of £7m. This would reduce our old forecasts (shown
above) from £43m to £36m and EPS to 36p (-16%). This equates to a FY pence
per litre margin of 2p. Assuming no improvement in margins, the annualised
impact on FY12E is £16m and this would reduce our forecast from £44m to
£28m, with EPS of 28p (-36%). The margin on this basis is 1.5ppl which is the
lowest we have seen from the group to date and a level at which the group would
question the benefits of further sizeable investment projectsNH
RWD has previously reported successful conclusions to negotiations with
Sainsbury and the Co-op and these have been factored into our forecasts.
Hence, we can only conclude that the main issue has arisen post a review
conducted by Tesco. On Monday, Tesco matched Asda's promotion on milk
which reduced the price of a 4 pint poly from £1.53 to £1.25. This is the
equivalent to a 12ppl reduction in the shelf price. Additionally, Tesco is
announcing that it will be increasing the price it pays to farmers by 1.28ppl.NH
This is clearly very disappointing for shareholders and RWD management alike
and for the next 6 months there are no obvious catalysts which could change this.
However, we should be aware that there are two retail accounts due to re-tender
in the coming year, Asda and Morrison, neither of which RWD deals with
presently. If there are any repercussions for pricing on these accounts it will not
impact on RWD, but it will of course be looking to see if there are any volume
opportunities for them in this process.NH
who knewNH
milk could be so interestingBE
Hm. On a day like this, I guess "interesting" is a relative term.

[masurenguy] 16/9/2010 11:14

spob - 16 Sep'10 - 11:25 - 62: I like the blue writing - very SMART

Dissembling instead of answering the question is muppet behavior !

[waldof] 16/9/2010 11:09

....keeping the dividend too.

[dave_howard] 16/9/2010 10:36

I agree with Jab118, the city marked this down too severely. No real basis to take 30% off based on a future trading statement margins are going to be squeezed...isnt that happening to all businesses at present, so nothing new. There results didnt warrant the drop as shown today.

[spob] 16/9/2010 10:25

I like the blue writing - very SMART

[masurenguy] 16/9/2010 10:08

spob - 16 Sep'10 - 10:40 - 60: such as this

The 'milk price issue' was covered in todays trading update and profit warning when they stated that production volumes will remain the same but that prices and profits would fall due to competitive pressure. Your link in the above post refers to the same issue.

You previously posted

spob - 16 Sep'10 - 53: I wonder if RWD is making up excuses to cover up somehing else

As I asked previously - what is the 'something else' you are alluding too ?

[spob] 16/9/2010 09:40

Masurenguy - 16 Sep'10 - 10:12 - 57 of 60


such as this

[jab118] 16/9/2010 09:38

fair comment spob

so did you open a short last night most likely you never and opened a short first thing today hoping it was going down further, would be more like it.

I really think you have made a short mistake if you have, IMO the city marked this down too severely and it looks like the market believe so as it steadily climbs...;-)

[spob] 16/9/2010 09:32

The muppets are the ones holding these last night

[masurenguy] 16/9/2010 09:12

spob - 16 Sep'10 - 53: I wonder if RWD is making up excuses to cover up somehing else

Such as what ! If you are going to make an intelligent contribution then please provide some substantive views.
Pure innuendo is always the mark of the muppet !

[jab118] 16/9/2010 09:10

OK can someone point me into the right direction with the below, I copyed from the statement.

It looks to me they have been spending on a new processing plant at Bridgwater. That to me is a shrewd move for the future ?

now I'm in. I'm researching PDQ on weather to buy more !


Plans to install the final element of capacity at Bridgwater are 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.

We intend to maintain the total dividend payments for the current year at 18p
per share in line with last year and retain a strong balance sheet with low
levels of debt.

We will report our Interim Results for the six months ended 2 October 2010 on
Monday, 15 November 2010.

[jab118] 16/9/2010 08:58

spob are you short here ? you always seem to appear when a share has been hit hard, SPI comes to mind !!!

[jab118] 16/9/2010 08:55

By the way I thought EXpress Dairies was a member of Grand Met ? or was that before Grand Met took them over.

[spob] 16/9/2010 08:54

I wonder if RWD is making up excuses to cover up somehing else

[jab118] 16/9/2010 08:52

Sly, we are in the mits of a beginning of a massive food inflation correction, in a years time milk prices in the supermarket will be double it is now, the last Government has been working on a cheap food policy for far to long.

wait and see !

[slytherin] 16/9/2010 08:42

These warnings tend to come in threes, and the price has recently double-topped. Also looks like the 30% share price fall is in line with the announced fall in profits (-£16m on £49m if fundamental data at top of thread is correct).

I had this situation with Express Dairies a few years ago, bought heavily after a slump like this - and it just got worse. It's a low margin industry and takes a long time to rebuild after a profit shock. Good luck to them and all though.

[jab118] 16/9/2010 08:19

I'm in 1000 share s for starters and a quiet thread as well just how I like it.

This has been marked down far to much by the city boys imo.