Robert Wiseman Dairies raised hopes for a rise in payouts to milk farmers thanks to a jump in cream prices by 26% last month to their highest in at least a decade.

The dairy group, unveiling an 81% jump in pre-tax profits, said that it raised the price paid for milk supplies by 0.3p per litre in August to reflect strengthening revenues for the cream produced as a byproduct of skimming milk.

"Should the recent increases in cream revenues be sustained, then this may support a further milk price increase," the UK company said, adding that it expected its cream takings to rise in the second half of its financial year, which started on October 4.

Time lag 

Industry-wide, the price of cream sold in bulk to industrial buyers, such as bakers, jumped £250 a tonne to £1,700 tonne between September and October, UK dairy pressure group DairyCo said, adding that the sales figure was the highest since its records began in 2000.

Some exports were achieving £1,750 a tonne, with the raised price increasing cream income to milk processors by 1.95p per litre to 9.6p per litre.

However, Robert Wiseman said that, because it sells more than 90% of its cream forward rather than at the spot value in the market, it would not for now enjoy such a significant increase in bulk cream sale prices.

"The DairyCo figures are an ex-dairy spot price," the company said.

"Whilst the DairyCo estimates have historically been consistent with our underlying experience, the recent recorded spikes in spot prices are significantly ahead of the prices generated by us in this period."

Oil price damage 

The comments came as Robert Wiseman reported pre-tax profits of £21.0m for the six months to October 3, on turnover up 7.0% at £423.9m.

June witnessed the group's biggest ever week-on-week rise in sales volumes, as it filled a gap in supplies to the Co-operative retail group left by the Dairy Farmers bankruptcy.

However, the group warned that its profits might, on a per litre basis, decline in the second half of the financial year thanks to the revival of crude prices, which has raised the cost of plastic packaging as well as transport.

"We have seen a return of significant oil-related costs, with the cost for our bottles and diesel for our vehicles heading upwards again," Robert Wiseman said.

City reaction 

The results were well-received by Panmure Gordon analyst Graham Jones who, in a note entitled "Hail, hail Robert Wiseman", raised his target on the dairy group's shares by 35p to 510p.

At Evolution, Alex Sloane praised Robert Wiseman for "another positive update". 

Nonetheless, the stock closed down 1.6% at 475p in London.