Cranswick sees strong festive trade figures
Taste for little luxuries boosts revenue
UPMARKET SAUSAGES and bacon producer Cranswick reported a strong performance over the key festive trading period.
The Hull-based firm said both total and like-for-like revenue rose in the last three months of 2017 as people splashed out on affordable luxuries in the run-up to Christmas.
While many consumers are cutting back on big ticket items like new cars and sofas, they are treating themselves to more expensive food items.
Cranswick reported growth across all of its categories and said export sales are also well ahead, following the fall in the pound and strong demand from countries like China and the US.
The UK pig price continued to ease back during the period, ending the quarter at a similar level to that of a year earlier. Cranswick said this downward trend is being reflected in selling prices.
Overall, the group said trading during the third quarter of the financial year was slightly ahead of the board’s expectations.
Cranswick is investing at record levels to increase capacity, add new capability and drive operating efficiencies.
The group said construction of its new Continental Products facility, based at Bury in Lancashire, is well advanced and progressing to plan, with completion expected in the first half of the next financial year.
When finished, the site will consolidate production from the group’s two existing Continental Products facilities, raise capacity by around 70 per cent, add new capability and drive efficiency improvements on existing product ranges.
Plans for a new primary poultry facility in Eye, Suffolk are being developed, with construction, subject to receiving planning approval in the coming weeks, expected to begin in the first quarter of the next financial year. The new facility, which is scheduled for completion in late 2019, will double existing capacity with further room for expansion. The facility will incorporate the highest animal welfare standards and latest generation production techniques and equipment to drive operational efficiency gains.
In a trading update, the group said: “With experienced management at all levels of the group, a strong range of products, a wellinvested asset base and a robust financial position, the board is confident in both the prospects for the remainder of the current financial year and the continued long-term success and development of the business.“
Analyst Darren Shirley at Shore Capital said: “Outperformance of the UK grocery market has been a feature of Cranswick for some time, and we are pleased that such outperformance has continued through Q3 2018, with total and like-for-like sales both ‘ahead of the prior year’ and also ‘slightly ahead’ of the board’s expectations.
“We estimate both total and like-for-like sales increased at a double digit rate.”
Analyst Sophie Jourdier at Liberum said: “Third quarter trading was slightly ahead of the board’s expectations. Year on year comparators are now harder but Cranswick reported volume growth in all categories and, although falling pig prices are now being reflected in selling prices, third quarter revenues were also higher year on year.”
Ms Jourdier said Cranswick’s ambitious investment programme is on track and it has also extended its banking facility until November 2022 on existing terms.
“Overall, a solid trading statement which should nudge consensus estimates up and support the share price following recent weakness. We remain holders with a 3300p target price,” she said.
Analyst Charles Hall at Peel Hunt added: “The strong progress in the first half continued into the Christmas period, albeit volume growth was slower as comparatives became harder.
“The strong volume growth and easing pig prices has helped margins improve.”
As a result, Peel Hunt is increasing its forecasts by 4 per cent.
“After a weak start to the year, this update should please the market and continues the theme of the good quality food producers performing well. The common theme is the increasing partnership with the leading retailers and the benefit of continuing to invest in assets,” said Mr Hall.