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African swine fever fallout sees Cranswick near-doubles pork sales to Asia


Cranswick unveiled a near-doubling in sales to Asia, as the pork-to-poultry group exploited the protein vacuum created by China’s African swine fever outbreak, which continues to cause market ripples worldwide.


UK-based Cranswick, reporting a 7.1% rise to £770.0m in group revenues for the April-to-September half, said that the growth had been “underpinned by a very performance in our Far East export markets” following outbreaks in the region, and most notably China, of the fatal pig disease.


The virus’s spread “has created the opportunity to increase sales into this region on commercially favourable terms,” a dynamic which “may continue in the medium term” as long as the UK itself remains free of African swine fever (ASF).


‘Higher input costs’

The statement came even as US-based meat group Hormel Foods – the Spam luncheon-meat maker, which relies on bought-in hogs for a large proportion of its pork - revealed a 15.1% drop to $75.5m on operating profits at its international division, which includes China, for the quarter to October 27.


“Higher pork prices due to African swine fever led to higher input costs in China and Brazil,” the group said, although reporting raised profits in its turkey and grocery products divisions.


Separately, the US Department of Agriculture on Monday tightened reporting restrictions on US exports of pork to enhance transparency in the face of surging demand from China.


Shippers must now disclose sales of hog carcasses in the face of “an apparent lack of commensurate reporting,” to the growth in Chinese orders.


The USDA has demanded disclosure of large US exports sales of a range of agricultural products after the Soviet Union in the 1970s secured huge purchases of rain under the radar in what became known as the Great Grain Robbery.


‘Significant uplift in demand’

Cranswick, a major UK pork producer, said that its export revenues to the Far East had soared by 94% year on year, “reflecting strong demand from China” following the ASF outbreak, with the group saying it now accounted for nearly 60% of all UK pork meat shipments to the region.


Overall sales in the fresh pork division rose by 15.1%, with volumes of pigs processed up 8.8%, against a backdrop of appreciating pig prices.


The price of UK pigs rose by 12% during the half-year, with the European Union reference pig price up 25% over the period, to stand up 21% year on year.


“The uplifts both during the period and year-on-year, and the premium to the UK pig price, have been driven by a significant uplift in demand from China.”


Market reaction

With Cranswick’s convenience products and poultry divisions showing weaker growth, of some 5% apiece, and the gourmet products operation a flat performance, group revenues gained 7.1% to £770.0m.


Adjusted pre-tax profits, at £46.4m, were up 3.6% year on year.


After the statement, broker Peel Hunt raised its target price on Cranswick shares to 3,000p from 2,900p, although this remains below the current stock value.


Cranswick share stood 2.3% higher at 3282p in lunchtime deals in London.


Shore Capital, terming the results “robust”, said that it saw significant opportunity for Cranswick to benefit from ongoing developments in the global protein market, noting its focused vertical integration, and more pointedly the rising demand for pork imports into China and South East Asia”.


Cranswick, thanks to “consistent delivery and exciting prospects”, “deserved” its “premium valuation metrics”, Shore Capital, estimating the shares as trading on a multiple of 23.3 times current-ear earnings, and a 16 times multiple of ebitda.

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