The pork specialist reported full-year 2010/11 profits to March 31 of £46.8m, up 6.8% on the previous year; turnover was £758m (£740m 2010).
Successful business areas for the year include fresh pork (+17%), and bacon (+17%), with the latter responding to the completion of the second phase of an expansion project at Sherburn (an air-dried bacon facility), which came onstream in the last quarter.
Sausage sales also rose 7%, spurred by a 50% capacity increase at Cranswick’s Hull facility, while £2m was spent establishing a second production site in Norfolk.
Sandwiches also performed well (+13%), while cooked meats (allowing for the transfer of the firm’s Deeside cooked meats facility to Farmer's Boy, owned by Wm Morrison) rose 8%.
Corned beef inflation
The firm did see continental sales dip 14% last year, due to one customer’s direct sourcing policy, but Investec Securities analyst Nicola Mallard said the foreign picture was generally positive.
“Outside of this the group made good progress in widening Continental’s customer base and also passing on the considerable cost inflation incurred in corned beef ”. Subsidiary Continental Fine Foods slices and packs corned beef, and Cranswick said rising input costs, which caused severe raw material shortages for the business during the year, were "successfully passed on in full" to retail customers.
That said, Mallard noted that the tougher domestic grocery climate in the fourth quarter (Q4), “did have an impact on sales, as did some small volume losses due to re-tender activity, resulting in flat Q4 revenue”.
She also warned that previous analyst worries about rising pig prices could be realised, despite pence per kg rates hitting a low of 130p earlier this year.
“It is now circa. 145p/kg, although this is still considerably below the estimated cost of production for pig farmers BPEX [which represents pig levy payers in England] suggest in excess of 160p/kg."
Mallard said that this price hike was partly seasonal – due to higher winter mortality rates – but that Cranswick expected prices to hit 150p/kg by mid-2012. “Recovering this sort of inflation is nothing new to Cranswick and it has dealt successfully with it in the past,” she said.
Stark consumer outlook
Cranswick also revealed that its joint venture with Morrisons, Farmers Boy (which will in future be excluded from group sales figures) contributed a £434,000 post-tax loss due to start-up costs, a factory reorganisation and expansion.
Chairman Martin Davey said of the 2010/11 results: "Record levels of sales and profitability have been achieved and substantial investment has been made in the asset base to improve efficiency and to provide the capacity for continued growth."
But Davey said difficulties facing the UK consumer, along with rising raw material prices and the a competitive market meant that the year to March 31 2012 "may be more demanding than usual".
"However, the Board anticipates that with the company's well invested asset base, strong range of products, experienced management team and robust financial position, it is well positioned to continue the successful long-term development of the company.
Cranswick processes fresh pork, sausage, bacon, cooked meats, charcuterie and sandwiches for UK retailers, food service and food manufacturers.