Cranswick sandwich and pastry growth offsets falls elsewhere

“Sandwiches delivered strong sales growth of 12%, driven by both new customer wins and organic growth with existing customers,” ​said Black, director and head of research at Shore Capital.

“Management highlights that the new contracts have added some complexity to its operation, though with a clear improvement in performance in evidence at the end of the period.”​

Black noted that pastry sales had been ‘significantly ahead’,​ according to Cranswick, albeit from a low base.

“As with sandwiches, the strong growth is ‘adding complexity’ to the operation, though we believe sales and profit performances are improving on a week-to-week basis in the run-up to Christmas.​

‘Broadening customer base’​

“Good progress is also being made in broadening the customer base. We see pastry (and sandwiches) as important components of Cranswick’s drive to drive sales participation in the fast growing foodservice/ food-to-go markets.”​

Sahill Shan, analyst at N1 Singer, said: “Speaking to management this morning we understand Q3 ​[third quarter] trading to date is proving strong, which is hugely encouraging given the importance of Christmas.​

“To date the group has not seen any incremental negative impact from the supermarket price wars. It points out that the sector it competes in has always been tough, and if anything there is scope to capitalise at the expense of weaker operators.”​

Export sales continued to go from strength to strength for Cranswick, said Black. Lower exports into the EU due to falling prices had been offset by strongly rising sales to the Far East and the rest of the world, he said.

“Management talks of about a third of volumes from its two primary processing facilities being shipped overseas, equivalent to c1,000t a week (40 x25t containers a week).”​

Pork sales fell​

However, pork sales fell 13% year-on-year, hit by a temporary loss of volume sales, said Black, although he stressed these looked set to recover in the second half of the year.

Cranswick had also recorded growth in gammon, continental product and cooked meats, said Black.

He said Cranswick’s extension to its Delico cooked meats facility in Milton Keynes, which it confirmed in its results had been completed on time and within budget, would further boost category growth.

Cranswick confirmed it had paid £23.6M for cooked poultry processor Benson Park. “We see the acquisition as highly complementary to Cranswick’s strategy, extending its protein range and broadening the customer base, particularly in the fast growing foodservice/ food-to-go markets in the UK,”​ said Black.

Cranswick reported revenues down 0.4%, from £483.5M in the first half of 2013 to £481.5M in the six months to September 30. However, the company reported adjusted pre-tax profit up 11.4%, from £23.2M to £25.8M, comparing the same periods.

Fiona Cincotta, analyst at Finspreads, said the strong increase in profits had come mainly from the falling cost of one of the Cranswick’s main ingredients: pork. “Pig prices have dropped from a high of 173p a kilo in December last year to 146p earlier this month and this is slowly feeding through into profits,” ​she said.

Investec analyst Nicola Mallard called the performance “a good H1 from Cranswick, with a solid revenue line and improved margins driving profit before tax”. ​She added: “We expect a stronger H2 revenue performance, with the group set for a good Christmas quarter.”​