Meat firm Cranswick has offset rising pig prices to deliver "impressive growth" in the three months to December 31, according to City analysts.
Cranswick delivered "impressive growth", despite soaring pig prices
Panmure Gordon analyst Graham Jones said: "The record UK pig prices appear to have been handled well through a combination of [what Cranswick called] efficiency improvements and constructive pricing discussions."
Cranswick had negotiated a potentially tricky quarter well, he added.
The firm posted 7% underlying sales growth in the three months to December 31. This was driven by volume growth, which Panmure Gordon estimated was about 6%.
Taking into account the acquisition of Kingston Foods, sales growth was 8% and volume growth about 7%.
Most categories delivered positive contributions, with particularly strong growth in bacon – estimated by Jones to be nearly 30% – and double-digit growth in sausages and cooked meats.
Increased capacity
The growth in bacon sales followed investment in increased capacity and efficiencies at the Sherburn-in-Elmet facility near Leeds.
Also, the extension of the Sutton Fields cooked meats facility in Hull was completed ahead of the Christmas trading period, in time to meet strong demand.
Panmure Gordon said the manufacturer continued to make good strategic progress. "While margins were impacted initially [by rising pig costs] this was in-line with our forecasts, and the modest fall in UK pig prices since the start of the year is also helpful ? although we expect prices to firm again in late spring/early summer."
Jones noted that Cranwick's new pastry facility remained on track to open in late spring. Also, two facilities received export licences to China during the third quarter and the application for Australian export accreditation is well advanced.
The Australian accreditation will open up a significant new market for some of Cranswick's high welfare, added-value, products, said the firm.
Cranswick reported record exports of fifth quarter products to the Far East.
Nicola Mallard, analyst with Investec, agreed that pig prices which soared to 160p/kg in the third quarter – were likely to rise again in March. "We still need to keep an eye on the evolving supply situation in Europe following regulatory changes," she said.
'New business wins'
Mallard predicted the firm's fourth quarter results should benefit from "new business wins". Also price increases secured during the period would make a stronger contribution in fourth quarter.
Accordingly, Mallard nudged the financial year estimate of profit before tax up by 1% to 47.8M and for next year by more than 2% to 51M.
Investec maintained its 'buy' advice on Cranswick stock.
Meanwhile, Cranswick said in a statement that net debt had increased from 32M to 48M during the quarter. This followed the expected seasonal increase in working capital and the sharp rise in input costs.
Net debt at the quarter end was well below the 59M reported at the same stage last year, it said.
"The group is in a strong financial position, with committed, unsecured facilities of 100M, which provides generous headroom going forward," said the firm.
