Robert Wiseman Dairies (LON:RWD) processes and distributes milk and associated products (like cream). It supplies store-brand milk to supermarkets as well as milk under its own label in its distinctive packaging. It delivers over 30% of the fresh milk consumed in Britain, every day. The company was established in 1947, starting out from a milk run at the family farm in East Kilbride.
Annual Results
Today (17 May), RWD reported results for the 52 weeks ending 2 April 2011. The market clearly didn't like the results, as the shares plunged over 3% today on their announcement, although I don't think there were too much in there that I didn't expect. The good news is that turnover increased by 3.5%, but the bad news is that operating profits decreased by 30%.
The company is being squeezed from both ends: by their customers (the supermarkets), and their suppliers (the farmers, and other input costs). On the demand side, milk is often a loss-leader for supermarkets, who use its price to lure in shoppers. There has been intense competition amongst supermarkets in the last year, so it is natural that RWD is caught in the crossfiire. On the input side, prices of feed has increased, and farmers are of course looking to pass this cost on to RWD. RWD has also said that the price of petrol is hurts them, as this increases the costs of producing containers for the milk.
Here are some highlights for the year:
- Net debt reduced by £16.2, to £4.9m. The company has always had a strong balance sheet, and interest cover is at a very high 36X.
- Bridgewater facility has been completed, and has a capacity to 500 million litres per annum. RWD can now distribute over 2 billion litres of milk per annum. The company believes that the facility is critical to the volume growth and improved efficiencies in recent years
- Expansion of Market Drayton milk reload depot expected to be completed in 2011
- Closure of some smaller depots as part of cost savings
- Increasing input costs necessitated a renegotiation of contracts with the supermarkets. The bugbear with this is that oil-related costs have continued to rise even after the contracts were revised.
- RWD is the lowest cost operator in the sector, and continues to target cost reductions, for example by investing in…
