Blackfriar: Cranswick brings home the bacon

Cranswick is famous for its upmarket sausages
Cranswick is famous for its upmarket sausages
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Upmarket sausage and bacon producer Cranswick has just finished its half-year period and analysts believe there will be more good news when it reports its interim results.

The Hull-based firm has done a remarkable job of bringing home the bacon in terms of revenue and profit whilst still investing in factories to keep it at the top of its game.

Cranswick said investment is at record levels and it is maintaining industry leading standards at all its facilities.

The firm is keen to use the highest animal welfare standards, which is important to consumers. As we eat less meat as a nation, people want to know that the meat they do eat is humanely sourced.

The UK may be in a Brexit crisis, but Cranswick is doing what it does best – keeping its head down, grafting hard and making canny investments and acquisitions.

Analyst Darren Shirley at Shore Capital expects Cranswick will announce organic sales have grown by around 5 per cent in the firm’s second quarter, up from growth of 1.5 per cent in the first quarter.

This would take core first half sales growth to between 3 and 3.5 per cent, after a boost from the Katsouris Brothers’ acquisition. Cranswick announced the £43.5m acquisition of leading Mediterranean food products business, Katsouris Brothers, which processes and supplies Continental and Mediterranean food in July.

The business operates from two facilities in North London and employs a total workforce of approximately 250. Costas and Louis Constantinou, managing director and commercial director respectively, will remain with the business. Cranswick said they have a wealth of experience in this “attractive and fast-growing sector”.

For the year to June 30, Katsouris announced revenue of £68m and adjusted earnings of £6m. It has gross assets of £30m and Cranswick expects the transaction to be modestly earnings enhancing in the current financial year.

Mr Shirley said stronger wholesale and export markets are expected to partially offset retail margin pressure at Cranswick.

Bearing in mind the weakness of the UK grocery market, Mr Shirley said this acceleration in sales is encouraging.

Cranswick has expanded its export markets and the impact of African Swine Fever has resulted in strong price inflation in China, which is the largest pork market in the world.

The firm expects pressure on UK retail margins to be a feature of 2020 and Mr Shirley does not expect that message to change.

However, Cranswick’s strong wholesale and export markets, and to a lesser extent new business wins, will partially offset this pressure.

Mr Shirley concluded that Cranswick is a high quality operator in the UK pork market, with a growing presence in the faster growing poultry market and the attractive Mediterranean/Continental products category.

Cranswick has made some canny acquisitions. Katsouris is an excellent example and it has used its North London base and expertise to build a notable presence in the large, fragmented and diverse London food service market where Cranswick has a relatively low participation.

Cranswick is a highly successful Yorkshire company which has ambitious plans for both nationwide expansion and global growth.

In the past, it has shipped cuts that British consumers tend to spurn such as offal, but now there is a demand for premium cuts such as shoulder and belly meat.

The group has also started shipping ribs to Canada where demand is growing rapidly.

Blackfriar notes that Yorkshire firms have a long history of knuckling down and getting on with it at times of huge political and economic upheaval. Cranswick is a fine example of this Yorkshire pragmatism and expertise.