Shares pile on pounds as sausage maker we tipped exports delicacies to China
BRITISH pigs are about £25 more expensive than their foreign counterparts and the UK imports 50 per cent of its pork. Nonetheless, food scares, such as last year’s horsemeat scandal, have spurred consumers’ enthusiasm for British meat and Cranswick is reaping the benefits.
Recommended by Midas in October 2007 at 845p, the shares tumbled in 2008 as the company suffered from a sudden rise in raw material and energy costs, but they have recovered to 1188p and brokers believe there is still more mileage in the stock.
Best known for its premium sausages, Cranswick also produces fresh pork, top quality bacon and a wide range of fancy ham and salami. Last year, the group bought a herd of pigs too and 20 per cent of its pork products now come from the company’s own farms in Yorkshire and Norfolk.
The percentage is likely to increase as the herd builds up, but the move has already given Cranswick more control over its supplies.
The company exports 1,000 tons of pork a week, particularly to China, but also to other parts of Asia and Africa, where there is a ready market for cuts that the British find unappetising, such as tails, feet and heads. Exports are expected to increase substantially and Cranswick is about to open an office in Shanghai to encourage Chinese consumers to indulge in more conventional British delights, including air-dried bacon, ham and sausage rolls.
Moving away from pork, Cranswick also makes beef burgers, sandwiches and pastry products, ranging from Marks & Spencer’s fish and chip pies to toasted sandwiches for coffee shops.
Cranswick’s customers include all the major supermarkets, garage forecourt owners such as BP and Shell and a number of food chains that offer sandwiches and light meals in airports and railway stations. The company is run by Adam Couch, who started out as a graduate trainee 23 years ago and is now chief executive.
Last week, Couch unveiled a 6 per cent rise in profits to £52million and a 7 per cent hike in the dividend to 32p for the year to March 31.
Brokers were expecting weaker figures as Cranswick had to cope with rising pig prices and cash-strapped consumers for most of the year.
The City is now looking for further steady growth, with profits of more than £55million for the current year and a dividend of 33.5p.
Midas verdict: Cranswick is a well-run company and Couch is determined to develop the business both in the UK and overseas.
A team of 90 people is working constantly on new products and Couch has developed close relationships with key customers such as Tesco, Sainsbury’s and M&S. As consumers loosen their belts, Cranswick should see sales and profits rise.
Loyal investors should stay with the business. Long-term investors should think about buying on weakness.