Better UK weather provides 'challenge' to Carr's

Shares in Carr's Milling Industries dipped after the group confirmed a dent from the improved weather in the UK, which has dented demand for feed products, besides undermining a competitive advantage in milling.

Tim Davies, chief executive at the UK-based engineering-to-flour group, highlighted a "challenging start" to the company's financial year from the "vastly improved" 2013 domestic wheat harvest, a result of decent summer weather.

The group had managed, after the dismal 2012 UK wheat harvest, to gain competitive advantage from the port-side location of its Kirkcaldy and Silloth mills, which constrained raw material costs as it, like rival flour millers, was forced to turn abroad for more of its grain needs.

Still, Carr's said that its milling division was trading in line with forecasts, and indeed was continuing "to ship both home growth and Continental [European] wheat direct to Kirkcaldy and Silloth".

The UK is a structural importer of hard wheat, typically from Canada and Germany, even in a decent year for domestic wheat quality.

'Softening in demand'

Carr's also acknowledged a setback from the relatively warm start to winter, with December billed as the mildest in the UK for 15 years, reducing the pressure on farmers to bring livestock indoors, and so limiting the need for bought-in feeds.

The group, for its feed blocks division, revealed a "softening in demand in the UK, following prolonged mild weather".

The downturn offset the boost to the US Carr's operations from unusually cold weather which has raised farmers' reliance on livestock feeding, and prompted "increased demand" for the company's feed blocks.

'Solid start'

Mr Davies said that the group overall was trading "in line" with board expectations.

And, at broker Investec, analyst Nicola Mallard said the Carr's had made a "solid start" to its financial year, which began in September, "against some tough comparatives… which included some weather-led feedblock revenue windfalls.

"Whilst we do not expect these to repeat, we do anticipate stronger profits from the less seasonal AminoMax and flour operations."

AminoMax is a feed protein for dairy cattle, which Carr's said had made a "positive start" to the financial year.

Share reaction

Ms Mallard restated a "buy" rating on Investec shares, with a price target of 1900p.

Nonetheless, the shares fell 5.0% to 1582p in morning deals in London.

"All of these [feed producer] stocks have had a good run of late, and the market is taking a pause for breath," a person familiar with the company told, with the group continuing to exceed expectations last year.

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