Robert Wiseman, the chief executive of the Scottish dairy giant, has been awarded a total pay package worth more than £1m, the company's annual report has disclosed.

The revelation of Wiseman's £100,000-plus pay rise comes just weeks after the East Kilbride company warned that 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 dairy firm 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. Oil shot up almost $11 a barrel last Friday alone, to a record $138.54.

More than half of Wiseman's £874,000 pay package came in his £480,000 salary, with the remainder comprising £360,000 in annual bonuses and £34,000 in "benefits in kind", which includes a car and private medical insurance.

However, while Wiseman's 2008 package did not include a company pension contribution, a spokesman for the group yesterday said that regulation changes allowed the chief executive to "sacrifice" some of his salary and instead receive an equivalent contribution directly to "make his own retirement provision".

The spokesman added: "Salary sacrifice is a far more tax efficient way of doing things."

The annual report notes that Wiseman received an "equivalent" pension payment worth £144,000, which takes his total pay package to £1.02m.

At the same time, total boardroom pay climbed almost 29% to £3.2m in 2008, compared with £2.5m last year.

Billy Keane, the group financial director, was paid £660,000, including a £146,000 bonus, up from £438,000 in 2007.

Last month, the company, which produced more than 1.5 billion litres of milk last year for the first time, warned that if costs continued to increases, and it might impossible 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, the company warned in May.

Nonetheless, analysts have remained confident that Wiseman will recover its poise after the impact of higher costs work their way through.

Andrew Saunders at Panmure Gordon recently 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."