Revenues for the three months to the end of June were up almost 10% on last year driven by volume gains of 7.7% thanks to continued strong retail demand, increased supply from the Eye poultry facility, and what the firm called a ‘sustained recovery’ in the food service and food-to-go sectors.
This growth was particularly impressive given volumes in the first quarter of last year jumped 22.5% as UK consumers cooked more at home during the first lockdown.
Export sales to the Far East were ‘well ahead of last year’ thanks to a big hike in prices, although the company is still waiting for final approval of its China export licence for its primary processing facility in Norfolk.
INVESTING IN GROWTH
The firm is using its improved cash flow from operations to continue investing in growth opportunities. Capacity at its Eye poultry facility was recently increased from 1.1 million to 1.4 million birds per week, and a new premium breaded poultry facility is being built in Hull with an extra £5 million added to the original £30 million budget to cater for a third production line.
Similarly, a new cooked bacon facility in Hull began commercial operation last quarter and another £5 million has been set aside to add further production to meet the estimated demand.
Thanks to tight cost control, the firm still has £200 million of available funding and its net debt position was only ‘modestly higher’ than at its year end in March.
Shore Capital analyst Darren Shirley described Cranswick’s first quarter growth as ‘outstanding’, adding ‘such delivery is set against very tough Lockdown 1.0 driven comparatives, which results in two-year like-for-like growth on pre-Covid sales of 31%, with two-year like-for-like volumes up by 17%’.
While there is no change to guidance, with management describing the full year outlook as ‘in line with expectations’, Shirley takes ‘considerable comfort from this, noting the rising UK and EU pig price, the ongoing challenges around labour availability that in some instances is causing considerable constraints within the domestic food supply chain and the recent fall back in Chinese pork prices’.
He also flags the unbroken run of 30 years of dividend raises under outgoing chairman Martin Davey, who turned Cranswick into ‘one of the great success stories of the British food industry’.