ROBERT Wiseman Dairies has warned the price of milk may rise as the cost of plastic and diesel continues to climb.
Glasgow-based Wiseman said the cost of the resin used to make plastic milk bottles had climbed 8 per cent in January to record levels, while the price of diesel for their lorry fleet had risen 12 per cent.
"If these costs persist, they are likely
to require an increase in our selling prices to maintain operating margins," the company said yesterday.
A spokesman for Wiseman, which provides around a fifth of Britain's domestic milk supplies, insisted no formal decision on pushing through price rises had been made, but it was "laying down a marker".
He said customers, which include the major supermarket chains, had been "understanding" about cost pressures in the past.
Wiseman, which processes around 1.3 billion litres of milk a year, also warned the price it pays to farmers may also need to be cut, due to falling dairy commodity prices.
The group links its payment to farmers to published full cream prices, which fell 23 per cent in the final quarter of 2007 to an average £1,080 a ton.
This normally would have prompted an immediate price cut to farmers – currently Wiseman's base farm-gate price is 25.7p per litre – but this has been held in place at least until the end of January "in the hope that this downward trend is short lived" the spokesman said.
Despite the cost pressures, Wiseman said its trading was in line with management's expectations in the ten months to January 26, after a "bumper" Christmas period. "The challenges presented by rising costs and volatile commodity pricing are familiar ones, which we expect to be satisfactorily dealt with in the period ahead" it said.
Its new facility at Bridgwater in Somerset was brought into operation prior to Christmas. The plant is expected to reach full initial capacity of 250 million litres a year by April.
The plant, closer to its south of England clients and producers, will, Wiseman predicts, save it around £2.5 million this year from reduced food miles, depot leasing costs and other operational efficiencies.
Nicola Mallard at house brokers Investec has forecast the company will report an 11 per cent increase in pre-tax profits to £37.5m, on turnover of £716m. The spokesman said the company was "comfortable" with the figures.
Mallard gave the shares a target price of 570p and said there was "limited risk of downside" of shares falling below 500p, noting that Robert Wiseman bought shares for cancellation at 490p last week. Shares in the company closed unchanged at 530p last night.
The full article contains 451 words and appears in The Scotsman newspaper.
