Cranswick makes move into Northern Ireland with Dunbia deal

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Cranswick (CWK) has snapped up the pork business of Northern Irish meat giant Dunbia for an undisclosed cash sum.

The Dunbia Ballymena site employs 360 staff and processes about 7,800 UK farm assured pigs each week.

It operates from a purpose-built facility in Country Antrim and in the year to 29 March 2016 the business generated revenues of £72.4m.

Cranswick said the acquisition enhanced its pig processing capability and established a significant presence in Northern Ireland.

Dunbia executive director Jack Dobson will support the Ballymena business in a consultancy capacity to help ensure a smooth transition.

The transaction will be funded from Cranswick’s existing debt facilities and is expected to be earnings neutral in the current financial year and earnings enhancing in FY18.

Cranswick CEO Adam Couch said: “I am delighted to announce the acquisition of Dunbia’s Ballymena pork processing business.

“This acquisition strengthens our UK pork processing business and provides us with greater control over our supply chain, ensuring that we can maintain the production and processing of high quality, UK farm assured, pigs which is central to our customer’s requirements.

“The management at Ballymena have created long lasting and sustained supply chain relationships and we look forward to building on this and continuing to invest in the facilities, and the team, over the years ahead. We welcome Jack and the team at Ballymena to Cranswick and look forward to working with them to develop the business further.”

It is the first acquisition for Cranswick since the £40m poultry deal for Crown earlier this year.

The deal for Dunbia’s pork business may mark the start of a piecemeal sales process for the wider business as reported by The Grocer earlier this year.

Dunbia, which processes beef, lamb and pork at 13 UK sites, put the business up for sale late last year but has so far failed to strike a deal.

The group, founded by brothers Jim and Jack Dobson in the 1970s, employs close to 4,000 staff in its British and Irish factories, processing 300,000 cattle, 1.4 million lambs and 800,000 pigs a year. It supplies Co-op, Asda and Sainsbury’s.

Cranswick was one of the parties rumoured to have made approaches to buy the pig processing division separately back in March of this year.

Shares in Cranswick have nudged up 0.2% this morning to 2,231p.

Morning update

Morrisons has launched a store pick service with Amazon to beef up its online capabilities. From today, Amazon Prime customers in selected areas can order a full Morrisons shop online via the Prime Now app. Orders will be picked at a local Morrisons store and delivered same day by Amazon either within one hour for £6.99 or in a two hour slot for free. The service will launch in selected postcodes in London and Hertfordshire.

This new ‘Morrisons at Amazon’ initiative broadens the Morrisons wholesale supply services available to Amazon customers. Morrisons wholesale supply to Amazon launched in June and has started well, the supermarket said in a short statement.

CEO David Potts said: “As food maker and shopkeeper, we have unique skills to help build a broader new Morrisons through capital light growth. ‘Morrisons at Amazon’ is another exciting joint opportunity and makes Morrisons good quality, great value-for-money products available to even more customers.”

He added that these initiatives were “capital light” for Morrisons and, although still in their early stages, will contribute to a £50m-£100m incremental profit opportunity.

Shares in Morrisons are up another 0.7% to 223.5p on top of big gains yesterday (see below). However, online rival Ocado, which already has an online agreement with Morrisons, has plunged 5.8% so far to 267.1p. Tesco is back down 0.9% to 215.1p after a big jump yesterday and Sainsbury’s is up 0.6% to 243.2p.

Sales, volumes and profits all increased at poultry processor Moy Park in the third quarter. Revenues were up 0.6% to £352.8m, which jumped to 3.6% on a like-for-like basis when adjusted for the discontinued canned beef business. The poultry supplier said it benefitted from an improvement in volumes and favourable exchange rates. Like-for-like volumes in the three months ended 1 October grew 1.3%, driven by activity in UK & Ireland. Like-for-like EBITDA jumped by £4.6m (or 17.1%) year on year to £31.4m thanks to the growth in the top line and increased operating efficiencies across the business.

Moy Park, which is owned by Brazilian meat packer JBS, saw volumes rise 2% in the UK & Ireland but sales fell £11m to £259m because of the discontinued canned beef business and the impact of commodity cost deflation. In Continental Europe, revenues were 16% ahead of a year ago at £93m, driven by favourable exchange rates.

CEO Janet McCollum said: “Against the backdrop of particularly challenging market conditions, the third quarter of 2016 has seen Moy Park continue to deliver a strong performance, with sustained revenue growth and an improvement in LFL profit before tax.

“Our progress continues to be driven by strong customer relationships and improved efficiency and cost control, as well as a culture of constant innovation, which was recently recognised by the award of a prestigious Grocer New Product Development Award for Moy Park branded ‘Extra Tasty’ Roast in the Bag whole chicken.

“Our business is built on the highest standards of food safety and quality, and we are entirely focused on meeting and exceeding the ever-evolving expectations of our customers and consumers. This focus has delivered another period of pleasing continued growth, which has resulted in Moy Park achieving a top 10 ranking in the OC&C Top 150 index of food and drinks companies for the first time.”

The business added that an experienced management team, an “outstanding” product portfolio and a robust financial position, puts Moy Park in a strong position to handle the ongoing economic challenges and uncertainty following the EU referendum. “We therefore remain confident in the continued success and development of the business,” the trading update said.

The FTSE 100 has slipped 0.1% in the early going to 6,788.65 points. B&M Bargains has leapt another 5.8% this morning to 259.2p on the back of yesterday’s strong results.

Yesterday in the City

Shares in Mr Kipling and Oxo supplier Premier Foods (PFD) steamed 4% higher to 47p yesterday as news emerged that its latest triennial pension valuation resulted in a fall in the group pension deficit on an actuarial basis to £416m, down from £1.1bn in 2013. It will reduce Premier’s future cash contributions by £100m. Disappointing first-half figures, with sales down 1.8% and trading profits tumbling 4%, were already priced in by the City following a second quarter update in October. The stock is still not close to the 55p level they were sat at before news of a stalled recovery was published a month ago.

Tesco (TSCO) and Morrisons (MRW) finished the day as two of the top five risers on the FTSE 100 index following the latest Kantar and Nielsen market performance data revealed that the discounters growth has slowed to its lowest levels for five years as the traditional supermarkets fight back. Tesco was up 5.4% to 217p – on top of the 3.9% jump on Monday following an upgrade to ‘buy’ by HSBC – to take the share price to more than 45% up so far in 2016. Kantar said in the last 12 weeks the retailer put in its best performance for three years.

Morrisons closed 4.5% higher at 222.1p – now up close to 50% for the year.

Sainsbury’s (SBRY) also benefitted from the renewed optimism in the sector, climbing 2.3% to 241.9p. Online grocer Ocado (OCDO) got a 1.2% bump to 276.1p.

The three listed supermarkets also helped the FTSE 100 jump 0.6% to 6,792.74 points, although a surprise dip in British inflation – down to 0.9% in October compared with 1% a month earlier – also played a part.

B&M European Value Retail (BME) was boosted 2.5% to 245p thanks to a 17% jump in profits as it continued to rapidly expand the store estate. The stock had been up more than 4% in early trading, but is still below the 270p IPO price as a result of a sell-off after Brexit as investors worried the discount retailer would be hit by the falling value of the pound as it China-sourced products became more expensive.

Dairy Crest (DCG) was one of the few fallers yesterday, down 2.7% to 580.5p. McBride (MCB) was also behind 2.1% to 176.5p and Irn-Bru maker AG Barr (BAG) was down 1.2% to 499.8p.