Shares in Cranswick (CWK) cooked up a tasty 5.9% gain on Friday, sizzling up 199p to £35.95 after the pork-to-poultry supplier raised pre-tax profit guidance for the year to 31 March 2020 thanks to ‘exceptionally strong’ export sales.
As the food producer flagged at the interim results in November, the incidence of African Swine Fever in Asian markets has created a significant opportunity for UK pork producers, to the extent that this year’s profits are now expected to be ‘higher than current market forecasts’.
LATE CHRISTMAS PRESENT
In an unscheduled third quarter update, Cranswick explained that the robust first half performance continued through the key Christmas period, despite the challenges facing its domestic grocery customers, with positive sales growth across all product categories.
EXPORTS EXCITE
Exports are on a growth tear and Cranswick today insisted the outlook remains positive as African Swine Fever creates opportunities for Far Eastern exports.
While Shore Capital noted some softening of the Far Eastern market over the festive and New Year period, the house broker explained ‘this is fully expected to be temporary and we suggest that if momentum rebuilds to prior levels then additional profit upside potential will become evident for both full year 2020 and beyond’.
Shore Capital upgraded its pre-tax profit forecast for the year to March 2020 by the best part of 11% to £97.5m, although it prudently left its 2021 estimate unchanged at £105m for now.
‘Whilst the upgrade is not a surprise, we have flagged the potential since the group’s November interim results, it is very welcome,’ continued the broker.
It believes Cranswick is ‘a class act with excellent management, a clear strategy, balanced growth, very well-invested manufacturing facilities and a long-term approach to its supply chain and vertical integration. We view the stock as a core component of any mid-cap UK equity portfolio.’
READ MORE ABOUT CRANSWICK HERE
Tapping into the British public’s insatiable appetite for bacon, pork and sausages has proved a profitable line of business for Cranswick for many years. Growth has been supported by tasty levels of capacity-boosting capital expenditure and in more recent years, the rapidly growing export business.
Cranwick continues to invest to support long-term growth. In December, it announced the acquisition of premium outdoor pig farming business Packington Pork, a deal that increases the group’s self-sufficiency in UK pigs processed to over 25%, securing direct control over a significant part of its supply chain for premium meat.
Keen to tap into healthier eating trends, Cranswick bought Mediterranean food products business Katsouris Brothers last year, a deal that further broadened its non-meat activities.
