Wiseman warns of big drop in profits

The Glasgow-based firm processes and delivers more than 30 per cent of the fresh milk consumed in Britain every day but said pressure on margins could push next year's profits down by as much as 16m.

The warning came despite year-on-year growth of 8.5 per cent in volumes in the last 23 weeks.

Wiseman said competitive pressures were being seen across all sectors of the market, including in convenience stores where it is competing with the recent roll-out of additional capacity by smaller dairy firms.

It did not provide further details on specific contracts, but analysts speculated over the impact of price wars among the major supermarket chains. Wiseman's retail customers include Tesco, Sainsbury's and Co-op.

Investec Securities analyst Nicola Mallard noted this week's decision by Tesco to match a milk promotion by Asda in a move which reduced the price of four pints from 1.53 to 1.25.

On the profits warning, she added: "This is clearly very disappointing for shareholders and management alike."

Wiseman warned its operating profits would be impacted by around 7m in the second half of its financial year to the start of April. There will be a further hit of 16m in the 2011/12 financial year if there is no improvement in margins or volume gains, it added.