Wiseman suffers amid milk price war

The Glasgow-based group reported a 3.5 per cent drop in pre-tax profits to 20.2 million for the six months to October 2 as higher sales were offset by moves to slash prices to compete with rivals, as well as increased costs.

But Wiseman, which warned over full-year profits in September, said it would step up its fight in the milk price wars, pledging to hold sales firm in the face of competition.

Supermarket supplier Wiseman, which processes and delivers more than 30 per cent of the fresh milk consumed in Britain every day, said margins had been hit by "considerable pressure" in the half-year.

It said: "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."

Rival Dairy Crest also confirmed difficult conditions in the milk sector last week when it posted a 24 per cent drop in profits across its dairies arm and said it was concentrating on major retail contracts to combat a declining and competitive middle-ground milk market, which covers sales to smaller retailers, independents, coffee shops and foodservice companies.

Wiseman said in September that current milk woes were expected to see operating profits impacted by around 7 million in the second half of its financial year to the start of April and a further hit of 16 million in the 2011/12 financial year if there was no improvement in margins or volume gains.

It is focusing on cutting costs to help limit the margin hit, but is also ploughing on with expansion plans to drive sales higher.

Billy Keane, managing director of Robert Wiseman, said the group was well placed to weather the current difficulties, with the "best dairy and distribution network in the industry".

It recently increased the capacity of its Bridgwater dairy to 500 million litres a year and has opened a new depot at Amesbury in Wiltshire.

The group has six other major processing dairies in Aberdeen, East Kilbride, Glasgow, Manchester, Droitwich Spa, and Okehampton.

Sales volumes in the half-year rose 8 per cent, although it still expects a drop at the full-year stage.