Carr's backs ideas that UK wheat crop overstated

Carr's Milling Industries backed ideas that last year's UK wheat harvest may have been smaller than data show, forecasting that a slowdown in the country's unexpectedly high rate of imports may prove only temporary.

The feed-to-engineering group, one of the UK's biggest flour producers, said that the strong pace of UK wheat imports - which in hitting 1.47m tonnes in the first seven months of 2013-14 were down only 9.0% from the previous season's bumper level was in part a "legacy" from the previous season.

Tim Davies, the Carr's Milling Industries chief executive, said that "people got used to handling imports, which went pretty well" in 2012-13, when the dismal quality of the UK crop forced millers abroad, particularly to Germany, for replacement supplies.

"We have moved back to the UK from the previous year," he added, with its mills at Kirkcaldy in Scotland and Silloth in north west England geared up to take grain from the South East, as well as the Continent.

'Not as much left on farm'

However, even though UK wheat imports slowed to a 19-month low of 122,378 tonnes in January, the latest month available, this may not herald a slowdown for the rest of 2013-14.

While the strong pace of early imports implies that extra supplies from the last domestic harvest should be left over, in fact the trade could see a fresh stress on foreign supplies "as we get towards the end of the season", Mr Davies told

Endorsing concerns, which revealed, that the UK crop may be smaller than the 11.9m tonnes that official UK data show, he said that "as we have worked through the crop, moved it around, it seems that there is probably not quite as much left on farm as we thought.

"It is difficult to get a handle on the amount on-farm" earlier in the season, he said.

Engineering hiccup

The comments came as Carr's Milling Industries unveiled a rise of 2.0% to £10.1m in earnings for the six months to March 1, the first half of the group's financial year, on revenues down 7.3% at £214.7m.

The modest growth in profits reflected a difficult period for the group's engineering business, caused by contract delays at its energy sector fabrication business, Bendalls.

In the livestock feed division, the group offset with a strong US performance the dent to UK profits from the mild winter, which cut demand, and has indeed dampened performance at rivals such as Countrywide and Wynnstay too.

Indeed, feed division profits rose 8.2% to £6.79m.

Foreign growth

Carr's Milling Industries saw record sales in the US of its feed blocks, encouraged in the southern US by restocking on cattle farms thanks to the regression of drought which around 2012 forced them to cut herd size through sales to feedlots, or producers further north with better pasture conditions.

This herd rebuilding "is important for future sales in the US", Mr Davies said.

In New Zealand, the world's top dairy exporter, where sales soared 89%, the group is still investigating setting up an in-country production plant.

With New Zealand's dairy expansion beginning to test its limits, the emphasis for farmers is "to make more use of what they have got" rather than maintaining an increase in cow numbers, a dynamic which bodes well for sales of Carr's Milling Industries products, he said.

Market reaction

The results were well received by analysts at Edison Investment Research, which published a fair value for Carr's Milling Industries of1983p.

The group's performance "demonstrates the success of management's sustained investment in product innovation and infrastructure and the development of international markets," Edison said.

"While the mild UK winter has caused purely domestic competitors to struggle, the group was able to report a modest year-on-year improvement in profitability."

Investec restated a "buy" rating on Carr's Milling Industries shares, with a price target of 1900p, terming the results "good".

The shares stood 2.7% higher at 1715p in afternoon deals in London.

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