Wiseman pumps £8m into Tesco ‘Pure’ range

By Elaine Watson

- Last updated on GMT

Related tags Robert wiseman dairies Volume

Wiseman pumps £8m into Tesco ‘Pure’ range
Robert Wiseman Dairies is investing £8m into doubling its processing capacity for filtered milk at its Droitwich dairy after striking a deal with Tesco to boost production of its ‘Pure’ range.

Wiseman, which posted a 59.9% leap in pre-tax profit ahead of analysts' expectations to £49.2m on turnover up 4.5% to £886.2m in the year to April 3, said: “Sales of this product [Pure] in our final quarter were up significantly compared to the previous year and this resulted in us running close to our existing capacity for this product type.

“Following discussions with Tesco about its plans for continued growth of this product type, we are delighted to announce that we are investing £8m million to double our processing and filling capacity for filtered milk.”

The firm, which posted a 9.1% surge in sales volumes over the period to 1.77bn litres, also revealed that the final phase of a capacity expansion project at its new Bridgwater dairy in Somerset (taking capacity to 500m litres a year), should be completed by November.

Upon completion, Wiseman would have the capacity to process more than 2bn litres of milk a year across the group (based on six-day working), said the firm, which is also in discussions with potential suppliers about implementing a new enterprise resource planning (ERP) system.

The milk processor has won a significant amount of new business during the year, said chairman Alan Wiseman:“The main contributing factor to our volume growth was the large gain with The Co-operative Group, which commenced in June 2009 following the collapse of Dairy Farmers of Britain, and amounted to 116m litres of additional business.

“It is pleasing to report that we have recently agreed an extension to our contract. Our contractual arrangements now run to August 2011 and our volumes are to increase by around 30m litres per annum from August 2010.”

Wiseman had also picked up new business with Spar distributors, Capper & Co and Blakemore, and secured a three-year extension to its contract with Sainsbury, he said.

Rising fuel and HDPE costs

Although operating margins had recently benefited from higher cream prices, said the firm, rising plastic and fuel costs were putting increasing pressure on margins, he said.

“In the last six months we have seen increases in oil related costs, with the cost of High Density Polyethylene rising steadily. Costs per tonne are now running at over £1,050, a 14% increase compared to the average cost in 2009/10.

“Fuel costs continue to rise and, following the recent upward trend in oil costs and fuel duty, we are once more paying more than £1 per litre (excluding VAT) for our diesel. As with HDPE, this equates to a 14% increase compared to 2009/10.”

Investec Securities analyst Nicola Mallard said she expected "steady progress" ​from Wiseman in 2011. "Full-year 2011 should show further steady volume progress, although margins are unlikely to match 2010 reported levels due to the windfall cream benefit last year.

"Cream is strong enough presently to help offset higher non-milk costs, although the group maintains a dialogue with customers."

Board changes

A boardroom restructuring will see Alan Wiseman stepping down as chairman in July to make way for his brother (current chief executive) Robert to take over as executive chairman, while finance director Billy Keane will take up the role of md.

Related topics Dairy

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