Cranswick has posted a 14% increase in third-quarter sales after benefitting from the low relative price point of pork versus other meats.
Market data highlighted growth in pork consumption during Q3, particularly of roasting joints, and that momentum was maintained over Christmas, Cranswick said in its interim management statement today.
“Both the versatility and the low relative price of pork compared to other proteins were central to this positive trend,” Cranswick said.
Third-party sales made by Wayland Farms – acquired by Cranswick last April – also contributed to the year-on-year increase during the period (1 October 2013 to 29 January 2014), it added.
Sales of pastry products continued to make “pleasing progress” and were boosted by a range of savoury-filled gourmet pies and an “exciting” Christmas offering.
“Both the versatility and the low relative price of pork compared to other proteins were central to this positive trend”
Cranswick
Input costs remained at record levels during the period but efficiency improvements, internal pig production and constructive pricing discussions with customers helped to partially mitigate the full impact, the company said.
“Consequently, there was some recovery in operating margin in the third quarter from that reported in the first half, although for the year to date it remains below that achieved in the comparable period last year,” it added.
The number of pigs produced internally now accounts for up to 25% of its weekly requirements following its acquisition of two additional breeding units from Dent Limited in December.
“This gives the group greater control over a robust and integrated supply chain, with a clear focus on premium British ingredients and, in addition, has offset some of the impact of higher input costs.”
Net debt increased from £37m to £55m during Q3 following a seasonal increase in working capital and investment in pig rearing and breeding.
Cranswick’s performance has attracted a favourable response from analysts.
“We remain of the view that with ongoing material sales out-performance, the potential for further margin recovery, a strong balance sheet and cash flows as well as investment in industry-leading facilities, Cranswick represents a core consumer holding for any small-mid investor,” said Darren Shirley, research analyst at Shore Capital Stockbrokers.
“Another strong quarter under its belt and this time accompanied by better raw material cost recovery,” added Investec analyst Nicola Mallard.
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