One to Watch: Robert Wiseman

Published on Monday 2 February 2009 20:32

ROBERT Wiseman Dairies (RWD) processes and distributes milk and diary products. Wiseman shares have been a nervous counter for some time but the latest trading update provided a measure of reassurance.

ONE TO WATCH

Robert Wiseman

319p -9p

Scotsman says BUY

The company has confirmed that lower cream prices will hit second-half profits by much less than had been previously feared.

Overall, volume growth for the second half of the trading period to-date has been over 6 per cent, better than expectations. If this translates over the full trading period it will have a material impact on earnings. On Sunday, the price paid to dairy farmer suppliers of raw milk was cut, which can hardly be good news for the agriculture industry but will improve RWD's margin.

The group is continuing to enjoy product growth from ultra heat-treated (UHT) milk, whilst its low-fat brands – including the One and Fresh 'n' Low are also doing well – courtesy of the health lobby.

RWD remains hostage, to an extent, to the power of its main market. However, it appears to enjoy a reasonable relationship with Tesco and has just won an important contract with the Co-op. Competitive concerns remain, particularly from the likes of Arla, which can be quite aggressive on price.

Any prospective investor in RWD must understand its vulnerability to a sudden loss of a keynote order, however unlikely that might appear. Even so, RWD is a well-run business and its existing customers might be reluctant to disturb a very successful and efficient commercial relationship.

Having nearly halved in value over the past 18 months or so, shares in Robert Wiseman Dairies certainly merit a look.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.