October 8, 2013


Cranswick reports revenue growth of 13%



In the first half of this financial year, UK meat processor Cranswick has reported strong volume growth despite margins remain pressured by rising pig prices.


Cranswick's update for the first six months to 30 September shows revenue growth of 13%. The majority of this was volume-driven, with total sales up 15%, and fresh pork and bacon turning in the strongest performance.


City analyst Investec said the results reflected "the continued consumer preference for pork but also new contract wins by Cranswick". Analysts at Shore Capital agreed, adding that, in the sausage category, "trading in one week in July was the strongest ever for a non-Christmas week".


However, Cranswick said that while revenue growth has been strong, "significant raw material price inflation", combined with "higher-than-anticipated start-up costs" related to its pastry business, kept operating profit flat on-year, at around £22.5 million (US$36.2 million).


It added that full-year profits are unlikely to exceed 2012-13 as UK pig prices likely to "remain at historical highs at least through to the end of the calendar year".


Shore Capital analysts Darren Shirley and Clive Black said Cranswick was right to keep profit expectations down.


"With the driver for the record high UK pig price being robust demand for UK sourced pork, and with the growth in the UK pig herd yet to reflect such rising demand, we believe it is sensible for management to assume no weakening of the UK pig price in the current calendar year, noting that historically October–December experiences further upward pressure on pig prices as demand rises into the important Christmas period," they said.


They added that Cranswick's decision to return to pig rearing, with the acquisition of Wayland Farms in April and two further pig breeding units in second quarter, was sensible, given the increase in demand for UK pork. Longer-term, they said, with pork increasing in popularity and remaining competitive on price compared to other meats, the prospects for Cranswick remained "very bright".