New business drives strong six months for Cranswick
For the six months to 30 September 2017, the business posted a 23% year-on-year jump in revenue to £714.6 million (m), up from £580.8m in 2016. Like-for-like revenue rose 18%. This revenue included contributions from the CCF Ballymena pork business acquired by Cranswick in November 2016.
The business also announced that the board had approved the investment in a £54m primary poultry facility in Eye, Suffolk with a further £13m associated investment to upscale existing milling and hatchery facilities. The facility is scheduled for completion in late 2019. It is also investing £4m in its Wayland farming operation to increase the breeding and finishing capacity of premium pigs in response to customer demand.
Comfortably ahead
The business' fresh pork revenue increased by 26.3%, "comfortably ahead" of the overall UK fresh pork market which saw volumes decline by a little over 1%.
According to Cranswick, during the period it gained new listings, including added-value summer ranges, and developed new processing techniques, which delivered significant eating quality improvements.
Analysis: 'Brits can't get enough bacon and sausages'
Fiona Cincotta, senior market analyst at City Index, said of Cranswick's half-year results. "It seems like Brits can't get enough bacon and sausages in their lives. Cranswick's revenue has grown at a blistering 23% at a time when economic uncertainty is making more expensive meat products, such as beef, that little bit less appetising.
"Margins have come under pressure from higher pig prices, even as the company boosts its own pig-rearing capabilities. But the rate of margin contraction hasn't been extensive enough to stop earnings from topping market expectations.
"It's also good to see that Cranswick is leveraging its strong financial position to make further inroads into the poultry sector, which should also help to shield margins from the vagaries of the pig market."
The Ballymena butchery hall extension was completed during the period, resulting in capacity being increased from 8,000 to 12,000 pigs per week. Further investment is being made at the Hull facility to lift pig chill capacity and to upgrade the rapid chill system to improve yields.
Total export fresh pork revenue grew by 30.1%, with a modest decline in sales to Far Eastern markets of 7.9% offset by a 133.2% increase in sales to other export markets, including the US and Europe. Growth in these two markets reflected stronger volumes and higher prices resulting from sterling weakness against the US dollar and the euro. Like-for-like export sales, excluding those from Ballymena, grew by 18.6%.
Cranswick's convenience division, which comprises cooked meats and Continental products, saw a revenue increase of 17.2%, thanks to new business wins in the previous financial year. The business made a £7m capital investment across its three cooked meats facilities during the period.
Gourmet
Revenue in gourmet products, which include sausage, bacon and pastry, increased by 27.7% in the period, with all sub-categories delivering double-digit volume growth. The overall market for these categories grew by 1% in volume terms, but super-premium ranges, which continue to out-perform the wider market, were up by 9%. The division's growth was driven by the new 'Butcher's Choice' business and new gammon and wet cure bacon business with one of the site's principal retail customers.
On the poultry side, Cranswick said its Crown chicken business continued to make "pleasing progress" thanks to new contracts being secured and closer ties being developed with its Hull Cooked Poultry facility. Including the full contribution from Crown during the period, revenue increased by 26.6%, with like-for-like salesgrowing 21.3%.
Adam Couch, Cranswick's chief executive officer, said: "We have invested a record £29m in our infrastructure during the first half of the year. As part of the development of our rapidly growing poultry business, we are announcing today our planned investment in a new primary poultry facility in Eye, Suffolk. This class-leading facility, scheduled for completion in late 2019, will double our existing capacity with further room for expansion. The facility will incorporate the highest animal welfare standards and latest generation production techniques and equipment to drive operational efficiency gains. We also plan to upscale our feed mill and hatchery operations to maintain our fully integrated supply chain model.
"During the period we have strengthened our asset base, enhanced market positions and developed new customer relationships. We continue to make good progress against each of our strategic objectives and we are well placed to continue our successful development in the current financial year and going forward."
