December 6 2013 Latest news:
Monday, October 7, 2013
A major supplier of bacon and sausages to leading UK supermarkets has warned that profits will be flat this year due to record pig prices.
Hull-based Cranswick is relying on its ongoing efficiency efforts to offset the higher pig price, which has been caused by increased retailer demand for British pigs, strong export markets and rising grain feed costs.
The pork producer, which has a fresh pork facility at Watton, north of Thetford, and employs 1,000 people in Norfolk, said operating profits for the six months to September 30 will be broadly flat, despite underlying turnover increasing 13% due to particularly strong growth in the fresh pork and bacon categories.
The company is likely to have prospered in the wake of the horse-meat scandal, which raised questions about the provenance of some foreign-sourced products.
It also believes that the “versatility and low relative price of pork” compared to other proteins has worked in its favour.
Cranswick was formed by farmers in the 1970s to produce pig feed, before expanding in the 1980s. It supplies Tesco and Sainsbury’s and recently won new orders from Marks & Spencer and Asda.
Cranswick’s efforts to offset rising pig prices have seen it buy two breeding operations which will mean its enlarged herd will be able to produce around 7,000 outdoor-reared pigs each week for use in premium range products. Panmure Gordon stockbrokers said this was equivalent to 20% of the company’s weekly requirements.
Earlier this year, Cranswick Country Foods signalled its return to the pig-rearing industry after snapping-up Little Melton-based East Anglian Pigs (EAP), near Norwich, which employed about 100 staff, for an undisclosed sum.
The move was aimed at tightening its grip on the supply chain and increased its commitment to providing locally produced pork.
The deal came at a tough time for many pig farmers, with the industry was losing about £1m a week amid warnings that supplies of pork and bacon were set to become even tighter in the coming months.
Adam Couch, group chief executive, said at the time its customer’s taste for locally sourced meat helped inspire the acquisition – despite divesting its pig-rearing business in North Yorkshire eight years ago.
But with UK pig prices set to remain high until the end of the year, Cranswick said it expects profits to be flat across the current financial year.
The company said: “The financial year out turn will be, to a large extent, dependent on the group’s ability to mitigate these costs through further operating efficiencies and the outcome of ongoing discussions with customers.”
Panmure Gordon cut its forecast for full-year operating profits by 6% to £50million following today’s update but said it maintained its forecast for the following year. Cranswick shares were 4% lower today.