Cranswick turns the corner back into profit

A surge in exports has helped pork supplier Cranswick to turn a first half loss into its second best annual profit.

The Hull-based company said it has doubled overseas sales to £37m over the past year.

The company’s chief operating officer Adam Couch, who will take over as chief executive when Bernard Hoggarth steps down in August, said exports account for only three per cent of sales at the moment, but this is expected to rise to between five and eight per cent.

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Mr Couch welcomed last week’s announcement that Britain will now be able to sell British pork directly to China under a landmark £50m deal designed to boost trade for British food and farming businesses.

Much of the exported pork will be offal, trotters, ears and other parts of the “fifth quarter” which British consumers do not eat.

At the moment Cranswick has to export its pork to China through the grey market.

While fifth quarter sales have boomed in China, Cranswick is now seeing increasing demand for more expensive cuts.

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“As the Chinese become richer there is increasing demand for more protein and a Western facing diet,” said Mr Couch. Cranswick’s other big market is the United States and now all ribs produced at its Yorkshire site are exported to America.

The group is looking to gain approval to export to the Australian market where it plans to sell Western cuts such as leg meat and the middle.

Pork’s increasing popularity as “the alternative white meat” has been boosted by its comparatively low price compared with chicken, lamb and beef.

A trend seen over Christmas towards pork has continued this year as cash-strapped consumers supplement more expensive meats with purchases of pork products.

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Cranswick said it had its most successful Christmas trading period for fresh pork, premium sausage and bacon products.

Pork is now taking market share from poultry as shoppers buy smaller roast chickens and turkeys and supplement the family meal with sausages, bacon, ham joints and stuffing.

N+1 Brewin analyst Sahill Shan said: “Growth is being driven by a structural shift towards pork by cash-strapped consumers as other proteins remain expensive.”

Cranswick, which supplies the Jamie Oliver and Weight Watchers brands as well as Sainsbury’s and Tesco, reported a 10 per cent rise in underlying sales to £821m in the year to March 31, driven by increased volumes.

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The group saw a 39 per cent surge in bacon sales, a 15 per cent increase in fresh pork sales and a 12 per cent rise in sales of its sausages.

Cranswick, which cheered shareholders with a four per cent rise in its final dividend to 19.5p, reported a three per cent rise in pre-tax profits to £48.4m as the cost of raw materials fell in the second half of the year.

The group introduced a new “breaded” line at its Norfolk plant with the capability of producing a range of escalope and schnitzel products for the convenience sector.

Cranswick’s said its second sausage production facility in Norfolk is complete and performing well, with a new range of products under the Norfolk Sausage Company banner launched.

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The company hopes a new range of burgers and meat balls under the Black Farmer brand will deliver in the upcoming barbecue season.

The only area of the business to come under continued pressure is the “continental” division, where sales were broadly flat compared to the previous year.

The group’s shares rose 6.5p to close at 825p.

Analyst Darren Shirley at Shore Capital said: “In a UK food market that has suffered a contraction of volumes in 11 of the 12 months Cranswick has reported, the delivery of such robust underlying revenue growth is more than commendable in our view.

“It reflects the ongoing levels of product innovation across the group, supported by the sustained investment in infrastructure which continues to underpin Cranswick’s competitive position.”