Trading remains strong at AIM-quoted NWF (LON: NWF) with first half profit ahead of last year and it has made an infill acquisition for its fuels division.
All three divisions are trading ahead of expectations. There is good storage capacity utilisation at the food division. Feeds volumes are slightly lower, due to good grazing conditions, but cost increases are being passed on. The strong milk price is boosting farmer incomes and offsetting higher costs.
The fuels division margins have offset lower volumes due to the warm autumn weather. December volumes were at normal levels.
Oxfordshire-based Sweetfuels is being acquired for £10m, net of cash, and this business made a pre-tax profit of £1.2m in the year to August 2022. Sweetfuels sells 20 million litres of fuel each year. There is a bigger proportion of heating oil than for NWF, so profit per litre is higher.
Peel Hunt is maintaining its current year forecast for the existing operations for now and increasing the earnings forecast by 2% to account for Sweetfuels in the rest of the year. A full contribution next year adds 8% to earnings.
The second half is the important period for the group, because it includes winter months and that is why Peel Hunt is cautious. The Sweetfuels deal indicates the potential for further consolidation in the fuels sector. At 266p, up 5p, the shares are trading on 14 times prospective earnings, while the yield is 2.9%.
