Shares in fresh pork-to-poultry supplier Cranswick (CWK) fattened up 4.9% to £38.06 on Tuesday as the quality food producer served up forecast-beating full year profits.
Besides lockdown driving bumper demand for food consumed at home, the scourge of African swine fever, which destroyed pig herds in China, also presented a major export opportunity for the Hull-headquartered concern.
EARNINGS SIZZLE
Results for the year ended 28 March 2020 showed total sales sizzling 16% higher to £1.7 billion. This drove better than expected pre-tax profits of £102.3 million, a tasty 11.2% growth year-on-year.
Cranswick’s total export revenue rose 92%, with Far East exports up 122%, as African swine fever had a material impact on the price of, and demand for, exports to the Far East.
As Cranswick explained in today’s update: ‘By year end, the widespread outbreak in China had resulted in a reduction of nearly 50% in the Chinese herd and an increase of almost 150% in the country’s pig price from January 2019.’
Cranswick said it was ‘well positioned to capitalise on the increased demand from China with our in-depth local knowledge of the Chinese market and our operational expertise enabling us to increase the supply of a wide range of products including prime cuts and full carcasses into the region.’
POSITIVE MOMENTUM
‘There has been a positive start to trading in the new financial year, though we remain mindful of the uncertainty around the longer-term effects of the COVID-19 crisis and Brexit negotiations,’ commented chief executive Adam Couch.
‘Nonetheless, our outlook for the current year is unchanged and we have a solid platform from which to continue Cranswick’s successful long-term development.’
SCOPE FOR UPGRADES
Given the uncertainty coming from the pandemic, not to mention Brexit, Shore Capital left its ‘prudently pitched’ 2021 forecasts unchanged, calling for pre-tax profits of £105m and earnings of 161.6p.
However, the broker also added that ‘upgrade pressure will build if current trading momentum is sustained’.
BRINGING HOME THE BACON
With a strong balance sheet and healthy liquidity, Cranswick also increased the final dividend by 9.8% to 43.7p for a total dividend of 60.4p. That extended its enviable unbroken dividend growth track record to 30 years.
During last year, the bacon, pork and sausages supplier supplemented its organic growth by spending a net £69.4 million on the acquisitions of Katsouris Brothers, a Continental and Mediterranean food products supplier that further diversified the business away from red meat proteins, as well as premium outdoor pig farming business Packington Pork and White Rose Farms, the latter deals increasing its self-sufficiency in UK pig supply.
