Cranswick shows inflation resilience as revenue rises by more than 12%

Cranswick fought off inflationary pressures in their most recent half-year period and produced 12.3% revenue growth assisted by price inflation and volume growth.

The 12.3% increase in revenue took their top line to £1.25bn and helped a 25% leap in operating profits to £85.5m, much higher than analysts expectations.

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The company’s shares were up 1.5% at the time of writing. 

The food producer reported resilient volume growth in all four main UK food categories.

Cranswick indicated a positive impact from expanding pig farming operations, efficient capital deployment, and stringent cost management, raising adjusted operating margin from 6.1% to 6.8%.

According to Adam Couch, Cranswick’s CEO, “Momentum has continued through the start of the third quarter as our customers and the UK consumer continue to appreciate the affordability, value for money and versatility of our core pork and poultry categories.”

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He added that,  “continued positive progress is made possible by the substantial ongoing investment in our asset base, expansion of our pig farming operations and the quality and capability of our colleagues across the business.”

The company’s statutory profit before tax rose by 41.3% to £86.9 million in comparison to the previous year’s £61.5 million, while statutory earnings per share increased by 29.9% to 119.5p, up from 92.0p in 2022.

 The interim dividend saw a 10.2% growth, reaching 22.7p. 

Return on capital employed improved by 54 basis points, reaching 16.4% in 2023, up from 15.9% in the previous year. 

The company continues to invest in their processes and is improving facilities across the country.

A multi-phased expansion project, totaling £62 million, is underway at the Hull pork primary processing site. While, a £23 million fit-out for a new houmous facility in Worsley, Manchester, is currently in progress.

According to Orwa Mohamad, analyst at Third Bridge, “Cranswick has demonstrated it has pricing power as it has wrestled with how to address high inflation. (square brackets) the UK poultry industry is facing a shortage of butchers and this is driving up costs for many food producers. Cranswick has been able to avoid such problems  by creating a more self-sufficient supply chain and employing greater automation.”

Furthermore, the total capital expenditure of £39.4 million has been allocated across the Group’s assets to enhance capacity, capability, and operational efficiencies, with over £600 million deployed since FY16.

The acquisition of the Elsham Linc indoor pig farming business for £31.7 million diversifies the Group’s pig farming operations and adds feed milling capability, bringing self-sufficiency in UK pigs to over 50%

According to Steve Clayton, head of equity funds at Hargreaves Lansdown, “It is hugely encouraging to see the group continuing to invest in the growth of the business. Cranswick have committed over £600m into capital investment in recent years, building greater independence through owning more of the farms that underpin their own pork production. Vegan and vegetarian exposure has been added through the Cypressa acquisition and now the UK’s leading poultry and pork producer is also the number one in houmous.”

However, Mohamad cautioned that “Cranswck’s margins are under pressured from union activists advocating for improved wages and welfare. Cranswick has also had to rejig it’s grain sourcing routes away from Ukraine and Russia.”

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