Record pig prices keep Cranswick profits quiet

UPMARKET sausage, pork and bacon firm Cranswick reported a leap in first half sales, but said record pig prices mean that half year profits will be flat.

Underlying turnover in the six months to September 30 rose 13 per cent, with fresh pork and bacon growing particularly strongly.

Hull-based Cranswick said pork’s appeal, versatility and relatively low price compared with other meat is driving this trend as people switch to pork for health and financial reasons.

Hide Ad
Hide Ad

Cranswick’s chief executive Adam Couch said pig prices rose to a new record high in July and stayed at this level throughout August and September. He said the significant rise in prices has been driven by robust demand for British pig meat.

Total sales for the six months were 15 per cent higher after taking into account the contribution from Kingston Foods and modest third party sales made by Wayland Farms.

The group said its gourmet pastry facility at Malton, North Yorkshire was fully commissioned during the first half although there were higher than anticipated start-up costs.

Cranswick has high hopes for the new factory as it will allow it to offer customers a broad range of premium savoury pastry products. Cranswick’s strength lies in the top end of the market and it is hoping to replicate the success it has seen in premium sausages, air cured bacon and fresh pork joints.

Hide Ad
Hide Ad

Marks & Spencer is the anchor customer at the facility, which produces upmarket, all-butter pastry products.

Mr Couch said that some of the pig price increase was offset by efficiency improvements and strong volumes, but the time lag in recovering higher input costs, together with the pastry start-up costs, mean operating profits will stay flat.

Over the half year Cranswick invested in pig breeding and rearing with the purchase of two additional breeding units that can house 3,000 sows. The investment brings the total number of sows owned by the company to 15,000.

The group said the enlarged herd will produce around 7,000 outdoor-reared pigs each week and will give it greater control over its supply chain, with a clear focus on premium British ingredients.

Hide Ad
Hide Ad

Cranswick said net borrowings were down on the previous quarter. It added that it is in a sound financial position, with committed, unsecured facilities of £100m to provide headroom going forward.

Cranswick said an increasing demand for premium British pork products by the UK consumer, coupled with strong export demand, mean the business is well placed to deliver further growth.

However, it believes that UK pig prices are likely to remain at historic highs throughout the rest of this calendar year and it said its financial performance will depend on its ability to mitigate these costs through operating efficiencies and price discussions with customers.

It expects full-year operating profits will be similar to last year.

Hide Ad
Hide Ad

The company will announce its interim results on November 25.

Analyst Darren Shirley, at Shore Capital, said: “Whilst revenue growth has been strong, Cranswick has experienced a significant increase in its core raw material through the period, namely the UK Deadweight Average Pig Price (DAPP).

“From the start of the six-month trading period, UK DAPP has increased steadily from 158.7p/kg to a recent high of 170.7p/kg, an increase of 7.5 per cent over the six months, whilst the average price over the six-month period of around 166p was 11 per cent higher than in the first half of last year.

“This is unchartered territory for the whole industry.”