Wiseman to supply another 35m litres to Tesco
Wiseman, which posted 3.5% drop in pre-tax profit to £20.2m on sales up 6.6% to £452.8m in the six months to October 2, said sales of Fresh'n'Lo and The One had grown by 100% and 30% respectively over the period.
It had also gained additional school milk volumes and started to install a new £1.5m filling machine at its Bridgwater dairy for snack size packs of fresh liquid milk due for completion in December.
Meanwhile, the planned £2m expansion of its raw milk reload depot at Market Drayton would create up to 50 new jobs.
Margins under ‘considerable pressure’
However, margins remained under “considerable pressure”, said the firm, which recently warned that “intense competitive pressures” would dent trading profits in the second half by £7m.
“A number of our major contracts have been renegotiated and intense competition in the middle ground sector has reduced selling prices. While sales volumes have been maintained, margins across all sectors have been eroded.
“This intense competition has not abated, but we remain committed to maintaining our existing volumes. We continue to review our customer arrangements and will seek to implement improved prices whenever possible.”
While bulk cream prices remained high, this has been offset by “customer price reductions, increased costs and an increase in the amount paid for raw milk supplies”, added Wiseman.
The price of high density polyethylene, which is used in plastic milk bottles, was up 7% and diesel was up 16% year-on-year, it claimed.
Operational efficiencies
On the plus side, Wiseman has made considerable progress with initiatives to reduce electricity, gas and water use.
“Further to the installation of a reverse osmosis plant at Bridgwater, we are now able to recover a significant proportion of the water utilised on site. During the period we also undertook a £1.2m spend on upgrading the refrigeration plant and an associated heat pump at our Manchester dairy. Further to this expenditure, the plant will reduce the use of electricity, gas and water in operating the refrigeration.
“We have also undertaken investment across a number of sites to optimise their use of electricity. This investment amounted to £0.5m and will deliver savings of up to 10% in electricity usage.”
As for packaging, the percentage of recycled material used in plastic bottles had increased from 10-15%, while trials to boost the recycled material from nil to 20% in its plastic bottle caps had also begun.
However, it was “disappointing” that to date this material was not providing a cost advantage, said bosses.
City reaction
Panmure Gordon analyst Damian McNeela said he was encouraged by the new Tesco business and expected Wiseman to make cost savings to recover its lost margins over the next 12 to 18 months.
However, Shore Capital analyst Clive Black said his “expectations for Bridgwater may not now be met although we note business wins for Wiseman from Tesco, which may assist the filling of the plant”.
