Robert Wiseman Dairies warned yesterday it could take a profit hit of as much as £8.5m this year as it struggles to pass on rising oil prices and other costs to its customers.

The East Kilbride company is heavily exposed to the oil price, using 500,000 litres of diesel a week for its 1600-strong vehicle fleet. It also uses oil-based plastic for its milk bottles.

Wiseman Dairies said in March it was seeking to renegotiate prices with its customers, mostly supermarkets. However, a six-week delay in agreeing the rise, the fourth it has sought in a year, knocked £2m off operating profit in the first quarter of its financial year from the end of March.

The company, which produced more than 1.5 billion litres of milk last year for the first time, said if it keeps seeing cost increases, which are coming from items like wages and utilities as well as oil, and it is not able to offset them with another price hike in the autumn, it could face a further £2m hit to operating profit over the year.

Falling prices in the bulk cream market could knock another £3.5m from operating profit.

Chairman Alan Wiseman said: "The combination of the increase in costs, delayed recovery in selling prices and shortfall in bulk cream revenues is likely to impact our operating profit for the current year in total by up to £8.5m."

This worried investors, who sent its shares down 44.75p, a 9% drop, to 452.25p over the course of the day.

Wiseman's preliminary results for the year to March 28 showed the impact of a £6.1m fine from the Office of Fair Trading for price fixing. Operating profit was down 11.3% to £31.6m and pre-tax profit was off 15.6% at £29.2m.

The company also swallowed £300,000 in legal costs from the OFT case and took a £400,000 hit from closing a Cornish dairy.

Wiseman maintained that it made no profits from price-fixing moves criticised by the OFT and it was all paid to farmers. On an underlying basis, stripping out these exceptional costs, operating profit was up 10.1% to £38.4m.

Wiseman also announced yesterday that the OFT has provisionally decided to close down a long-running inquiry into the fixing of milk prices in the Highlands from 2000 to 2003.

Analysts remain confident that Wiseman will recover its poise after the impact of higher costs work their way through.

Andrew Saunders at Panmure Gordon wrote in a note: "Given the high-quality asset base and low-cost production, the company should recover margins in due course. However, this is likely to take longer than previously thought."