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Cranswick, unveiling expansion in unsettled UK poultry sector, sees shares hit record high

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Cranswick unveiled an expansion in the turbulent UK poultry sector, in a move which extends further its control over its meat processing supply chain, as the sausages-to-pastry group unveiled results which beat some market expectations.

 

Shares in the group soared to a record high of 3361p in early deals in London, before easing back to 3295p in lunchtime trading, a gain of 9.2% on the day.

 

Cranswick, whose brands include Woodall’s, Simply Sausages and Bodega, unveiled £67m plans to double capacity at a poultry production site in Suffolk, in eastern England, including £13m on expanding hatchery and feed milling facilities.

 

The move comes a year after Cranswick purchased the site with the acquisition of Crown Chicken, which currently has processing capacity of some 25m birds a year.

 

Industry consolidation

 

The expansion, due for completion in late 2019, will “incorporate the highest animal welfare standards and latest generation production techniques and equipment to drive operational efficiency gains”, said Adam Couch, the Cranswick chief executive.

 

And they come amid a shake-up in the UK poultry sector, which is witnessing the merger of several operators, with Cargill’s UK poultry operation and Faccenda unveiling tie-up plans, after the purchase of Bernard Matthews by Boparan Holdings’ 2 Sisters Food Group.

 

Meanwhile, food safety in the sector has come under scrutiny after workers at one 2 Sisters poultry processing plant were revealed to be changing slaughter dates to extend the shelf life of meat.

 

Supply chain control

 

Indeed, Cranswick has cited food safety as one reason for extending its operations in primary production, a drive which has already seen it develop its pork production business into the third biggest in the UK.

 

The move also allows it greater control over prices paid for meat, which many poultry observers believe stand to rise following the latest consolidation round, which is also seeing Moy Park purchased by US-based Pilgrim’s Pride.

 

In pork, the group reported that the average UK pig price for the April-to-September half was 29% higher than a year before.

 

Broker reaction

 

The comments came as Cranswick unveiled a 17.2% rise to £44.4m in underlying pre-tax profits for the -to-September period, on revenues up 23% at £714.6m.

 

The profits were deemed ahead of forecasts by Investec, which had forecast the figure at £43m, while Shore Capital said that the results “demonstrate the significant benefit of management’s clarity of strategy, industry leading investment profile and operational excellence”.

 

Davy said that Cranswick “retains ample balance sheet capacity for future growth and is well positioned vis a vis peers to navigate potential Brexit headwinds”.

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