Preference for pork sees Cranswick beat market

Shares in the Hull-based firm yesterday gained 3.4 per cent after it revealed underlying volume growth of five per cent in the six months to the end of September.

That compared with a food market which has witnessed volume declines in eight of the past nine months, as cash-strapped consumers waste less and buy less.

“Pig meat products continue to gain an increased share of the UK retail protein market,” said Cranswick. “Both the versatility and the low relative price of pork to other proteins are key to this positive trend. The growing popularity of pork products has been a contributory factor in the increase in sales at Cranswick.”

Its shares gained 21p to 636p.

Cranswick’s underlying sales volumes grew three per cent in its first quarter, but accelerated to seven per cent in its second quarter. Exports also grew strongly, and Cranswick expects them to double this year to make up almost five per cent of the group’s total sales.

Underlying turnover during the first half increased six per cent on a year earlier, reflecting the faster growth in the second quarter.

Total sales were up three per cent once the impact of business transferred to Farmers Boy, its joint venture with supermarket Morrisons, was factored in.

Chairman Martin Davey said pork has increased its market share by about three to five per cent compared with other proteins.

“Pork is a very competitive product,” he said. “It’s gained market share from beef and lamb.”

Cranswick issued a surprise profits warning in July, when the group warned it had not been able to push through the full impact of surging pork prices to its supermarket customers. At the time its shares shed 15 per cent when it warned half and full-year profits would miss expectations.

“The market overreacted to the statement at the time,” said Mr Davey.

“We told the story as it was.

“The market has now taken recognition of what’s a particularly difficult environment for the consumer.”

Pork, its main raw material, increased by about 15 per cent to peak at about 154p per kilo in the summer. It has now edged down to about 145p/kg, said Mr Davey, and he said there are positive signs of commodity prices easing.

“We are very mindful of the pressure that the consumer is under,” he said. “We are working with the retailers to reflect the higher input costs in higher selling prices.”

However, he said where full price increases cannot be passed on, the group is absorbing them.

Cranswick said its £100m of investment over the past five years is also paying off, such as the expansion of its main processing plant in Hull.

The group has achieved record production volumes at the site in recent weeks, after its £12m investment at the site increased capacity by about 50 per cent.

Cranswick added the extension of its £20m air-dried bacon factory in Sherburn-in-Elmet near Leeds has also been fully commissioned.

Cranswick said sales of pastry products, sausages, ham and bacon have all grown, and it has won sandwich listings with two major grocers.

Its net debt was broadly level with its March total of £48m, down on the £55m at the end of July. It has unsecured debt facilities of £100m.

Cranswick employs about 5,000 staff, with the majority of these in Yorkshire.

Analysts at joint house brokers Shore Capital said the trading update was “reassuring”.

“We believe Cranswick is very well placed from both a capacity and operational efficiency perspective post the recent investment programme,” they said.

Success with exports to us

CRANSWICK has big ambitions to grow its pork exports. Earlier this year the premium pork producer became the first British food company to gain United States accreditation in over 15 years, winning the approval of the US Department of Agriculture.

The company started exporting to the US at the end of May, where it earns more for its baby back ribs than in the UK.

Cranswick’s investment in its Preston site near Hull turned the factory into a state-of-the-art facility that meets stringent US standards.

Cranswick is also exporting ‘5th Quarter’ products such as offal, rind, heads and trotters to East Asia, where it is being boosted by the pound’s weakness.