The pork and pastry business posted sales in the three months to December 31 2014 slightly ahead of the same period of 2013. As fresh pork returned to growth, underlying sales, excluding the contribution of the recently acquired Benson Park, rose by 2%.
Underlying revenues fell by 3%, as lower input prices were passed on to customers. Export sales continued to rise during the period with sales to non European markets up by 38% compared with the same quarter of the previous year.
The performance won praise from Investec analyst Nicola Mallard. “Cranswick continues to buck the trend in UK grocery, reporting a good Q3 [third quarter] volume performance and we expect the improved momentum to be maintained into the final quarter,” she said.
‘Well-placed to weather the competitive landscape’
While deflation in pig prices continued to hit revenues, that had not proved detrimental to profits, she added. “The group looks well-placed to weather the competitive landscape, with a strong management team, a well-invested asset base and a healthy balance sheet.”
During the quarter, the pig price fell from 155p/kg to 145p/kg and could still fall further, predicted Investec. The January to March quarter typically sees seasonal weakness in pig prices.
Sales volumes were expected to rise in the fourth quarter, as the group continued to build longer term relationships with its UK customers, said Mallard. It also continued to add new business in other categories and export business has also been buoyant, especially to the Far East.
Investec retained its ‘buy’ recommendation on the firm’s stock.
‘Stealing market share’
Analyst N+1 Singer described top-line performance as mixed but was encouraged by its ability to drive volume growth in a difficult grocery sector. “We see its leading sector position as a virtue and expect it to continue stealing market share from weaker operators in a difficult sector,” said its analyst Sahill Shan.
The analyst praised the diversification into the poultry sector and the food-on-the-go channel mix, which promised to improve the quality of earnings. It retained its ‘hold’ recommendation on Cranswick stock but “with a positive bias”.
Shore Capital was similarly upbeat about the firm’s performance. Its analyst Darren Shirley said: “Across its categories, we believe that Cranswick delivered double-digit growth in sausages, high-single digit growth in continental products, low single-digit growth in bacon and slightly lower sales in cooked meats.”
Pastry growth was strong, albeit from a low base. Export sales continued to break company records with 128 loads shipped to China in December alone, he added.
Shore Capital left its profit expecations unchanged – forecasting 2015 operating earnings of £57.6M, current pre-tax profit of £56.4M and earnings per share, up by 7.6%, at 90.5p.