Strong results for Cranswick

Revenues at pork producer Cranswick rose in the first six months of 2012, despite the increase in input costs, the company announced this morning.

In the six months to 30 September, total revenues for the pork producer were up 6% to £418.6m, from £393.9m last September, with profits before tax also rising to £22.5m, up 21% on last September’s £18.5m figure. Underlying revenues also increased by 5%, excluding the revenues from cooked meat company Kingston Foods, which was acquired in June. Net debt also fell, down from $48.2m to £32.2m.

The company noted that rising input costs continued to be a feature of trading during into the second half, although it said that improved efficiency and investment had helped mitigate the full impact, along with “ongoing constructive pricing discussions” with customers.

Cranswick’s chairman Martin Davey said it was “pleasing” to report continued growth in sales in a difficult economic and consumer environment, saying the results reflected the ongoing popularity and versatility of pork and its low relative price compared to other proteins.

He said: “The board currently anticipates a more balanced trading performance between the first and second halves compared to last year, when there was a strong second-half bias. The strategy for the development of the business remains unchanged, with future growth being generated by a combination of acquisitions and organic initiatives.”

He noted that Kingston Foods had made an encouraging contribution to the group, both extending Cranswick’s customer portfolio and strengthening its cooked meat production capability.

Cooked meat was up 10% and there was also good growth in sandwiches and sausage, up 15%, Fresh pork numbers were more modest than in recent years, up 5.8%, which city analyst Investec attributed to reduced export volumes as the group had held back shipments ahead of securing its own direct export licence to China. Continental saw a modest increase in sales after a poor showing last year, while the new pastry division sales, reported for the first time, were £2.4m.

Nicola Mallard of Investec Securities said the strong interim results showed a “healthy increase in profits”, in line with expectations, noting that progress had generally been spread across all categories. Although rising input costs towards the end of the period had impacted slightly on the second and third quarter, she said these had been succesfully offset and returns were considerably better than the previous year, with margins returning to more “normal levels”.

She said:“The group is flagging a more balanced profit contribution between the two halves this year (versus the prior year’s 40/60 split). We do not expect second half margins to match those achieved last year, due to the cost inflation in the early part of second half of 2013, and also slightly less buoyant export margins. However, building this in still allows us to maintain our FY13E PBT forecasts at £47.2m.  

However, she said that although pig prices appeared to be stabilising – the DAPP now stands at 160p/kg – it was still hard to forecast beyond the new year, due to the potential impact of the changes in EU regulation on pricing. “If further inflation occurs, the group will work to recover it, as it has in recent months,” she warned.

She also noted that the “interesting sector development” revealed by Vion’s withdrawal from the UK market could have implications for the competitor landscape, although how it will effect the sale of its red meat market, either through the sale of whole or separate units “is not yet clear”.

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