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Cranswick sidesteps hit from record pig costs

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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 period.

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.

Market reaction

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 domestic market.

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 shares.

"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.


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