Cranswick shares tumble as it warns of tough state of market

Shares in the Hull-based company, which supplies fresh pork and gourmet sausages to the leading supermarket chains, fell 41p to 790p following the warning.

The group said it is wary about the difficulties facing consumers and the dynamics of the competitive UK market this year.

A number of food retailers have warned that the consumer environment is about to get a lot tougher as Government spending cuts, public sector job losses, higher petrol prices and soaring food raw materials prices take effect.

Cranswick is well-placed to ride the downturn as it is heavily reliant on pork products, which are cheaper than chicken, lamb and beef.

The company said that more customers are switching to pork, which it has been dubbed “the alternative white meat”, for both health and money reasons.

Cranswick also has the capacity to produce cheaper products if the market demands it.

While best known for its gourmet sausages it also supplies the budget end of the market.

The group said that its well invested asset base, strong range of products, experienced management team and robust financial position mean that it is well positioned to continue the long-term development of the company.

It reported a four per cent increase in underlying like-for like sales in the year to March 31.

The group said its trading performance for the year to March 31 would be broadly in line with its expectations.

The results are due to be released on May 16.

Underlying sales in the first three months of 2011 were flat as consumers started to tighten their belts.

Analyst Nicola Mallard at Investec said: “For the fourth quarter, markets have been more challenging, with sales flat for this period.

“This reflects the difficulties facing UK consumers and is borne out by recent Kantar/Neilsen data which has showed slowing sales progress across the major UK retailers.

“In addition, there has been more re-tendering activity which has resulted in some modest volume loss which has offset steady growth elsewhere.”

The group’s Deeside cooked meat business was transferred into the Farmers Boy (Deeside) Limited joint venture last July.

From this date onwards sales are excluded from group total sales.

This had an impact on the comparison of total sales which were two per cent ahead for the full year and down six per cent in the final quarter which covered the first three months of 2011.

Following the commissioning of a new abattoir at the company’s fresh pork facility in Hull and investment at the Norfolk facility, the company said its fresh pork businesses are now fully integrated.

Meat of the matter

Cranswick’s activities are focused on the UK and include the processing and supply of fresh pork, sausage, bacon, cooked meats, charcuterie and sandwiches.

Products are primarily supplied into the UK food retail, food service and food manufacturing sectors. Results for the year to March 31, 2010 showed sales of £740m and profit before tax of £43.8m.

Cranswick said that cash generation from operating activities has remained strong through the final quarter, resulting in year-end net debt being lower than that of a year ago.