Cranswick shares nudged upward to their highest in nearly
six years as the pork products group revealed some success in passing on record
UK pig prices to supermarket buyers, and export headway too.
The group, whose brands include Bodega, Simply Sausages and
the Black Farmer, flagged the rise in UK finished pig prices to a record
160.95p per kilogramme last month, "a feature of trading" during the October-to-December
UK pig prices have felt upward pressure as farmers pass on
higher feed prices, which have lifted the cost of production nearly to 169p per
kilogramme, leaving producers running at a loss estimated by the Bpex bureau at
£7 per animal this month,
UK pig producers lost about £60m in 2012 as a whole,
according to Bpex, which cautioned that "forward feed quotes suggest that
production costs are likely to remain at or above their current level until
next summer, at least".
Fifth quarter exports
However, Cranswick said that while the higher pig prices "impacted
margins initially" during the latest quarter, "efficiency improvements brought
about by ongoing capital investment and constructive pricing discussions with
customers helped to partially mitigate the full impact".
The group also reported "buoyant" export sales, including
record shipments of about 2m kilogrammes to the Far East of so-called "fifth
quarter" products – such as offal, trotters, ears – which UK diners do not eat,
but which are popular in countries such as China.
Indeed, Cranswick's two fresh pork facilities, in Hull and
Norfolk, were awarded export licences to China during the quarter.
The group is currently sending about 25 containers a week to
the Far East, compared with a rate of about 15-20 a year ago, and said it was "well
advanced" too in gaining consent to ship pork to Australia.
Cranswick said that its sales for the October-to-December
period were 7% higher than a year before, "underpinned by strong volume growth",
with sales of bacon, sausages and cooked meats "particularly strong" on the
The data was well received by analysts at Shore Capital, who
described Cranswick's trading performance as "strong", and prospects for the
current January-to-March period, the last quarter of the group's financial
year, as "very robust".
"Cranswick's robust revenues and cash flows, strong balance
sheet and well-invested infrastructure should make the stock a core holding in
a small and mid-cap consumer portfolio," the broker said.
Panmure Gordon analyst Graham Jones, terming the trading statement
"impressive", lifted to 1000p, from 800p, his target price for Cranswick
"Cranswick continues to make good strategic progress, and
the slight easing of UK pig prices since Christmas is helpful," Mr Jones said.
The shares closed at 960p in London, their
highest since April 2007.