City analysts today (1 August) praised UK meat supplier Cranswick’s rise in first-quarter sales, with the sausage and bacon supplier increasing volumes in a challenging sector.
Cranswick reported a 7.4% rise in sales for the three months between 1 April and 31 July to GBP209m (US$324.8m) It said sales had increased across “all categories”.
The results follow a year in which Cranswick posted an 8% increase in sales. The company’s profit performance was mixed. Net profit was boosted by lower tax charges but Cranswick struggled with escalating input costs throughout the year, resulting in a 5% decline in operating profit. That said, margins recovered in the second half of the year.
Shore Capital said Cranswick’s first-quarter sales growth had been “driven by price”. However, he added: “We believe also includes healthy volume contribution of 2.5-3.0%. In a UK food market continuing to experience significant volume declines, Cranswick continues to deliver a more than commendable performance. The performance is set against a 5% LFL comparative from Q1 2011, and follows a very strong Q4 2011/12 when Cranswick recorded LFL sales growth of 10%.”
Cranswick said it had seen “strong gains” in sales of sausage, bacon and continental products. Panmure Gordon analyst Damian McNeela said the company had dealt with an around 10% increase in pig prices from February through better volumes and efficiency.
“As such we maintain our forecast for 5.8% operating margins in FY 2013 and continue to expect the company to deliver 7% PBT growth to GBP48m,” he said.
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However, McNeela added the volume increases were not across the board. “Given the varying ability of each of its categories to pass price increases on in FY 2012, some categories delivered strong volume growth such as fresh pork whereas bacon’s growth was attributable to price increases,” he said.
Cranswick posted a fall in first-half profits in its last financial year. However, Investec analyst Nicola Mallard predicted Cranswick would see profits grow in the first half of the current year.
“Pig prices have increased in Q1, but the inflation is far more modest than we saw this time last year, and has been absorbed through increased volumes and operating efficiencies. Hence, we anticipate margins in 1H13 should exceed 1H12. Coupled with strong revenue growth, this year’s 1H should show good profit progress,” she said.