City analysts today (26 July) cut their profit forecasts for Cranswick in the wake of the UK meat firm’s profit warning but remained positive about the company’s medium-term prospects.
Rising input costs and a challenging consumer environment have hit Cranswick’s profit margins, which said this morning that it expected to “deliver a full-year result below its original expectations”.
Go deeper with GlobalData
The company’s share price has dived on the news, down 12.31% at 14:35 BST to 648.9p a share.
Cranswick did not provide specific estimates for its annual profits but analysts suggested that its pre-tax profits will fall by GBP40-41m.
Investec analyst Nicola Mallard has trimmed her forecast for annual pre-tax profit forecast by 13% to GBP40m to reflect the impact of increased raw material costs and what Cranswick described as “extremely challenging” market conditions.
Mallard described the challenges faced by Cranswick over the first quarter, saying that pig prices have increased almost 15% since a low in March to 153p/kg. She said that such cyclical moves are “nothing new” for Cranswick” but insisted the recovery process had proved “more protracted” than anticipated given the backdrop of deteriorating consumer confidence.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe second half should be better for Cranswick, argued Mallard, as price increases become effective in the next few weeks, and with pig prices set to retreat “as we move through the summer months”. Mallard is forecasting the company’s second half pre-tax profit to be broadly flat year-on-year at GBP45m, which she said “feels prudent enough in this difficult consumer climate”.
Shore Capital analyst Clive Black downgraded his forecast for Cranswick’s pre-tax profits by approximately 15% to GBP40m.
However, Black said Shore Capital held “Cranswick’s management in very high regard” and described the team running the company as “experienced, talented and conservative”. Black commended the conservatism displayed by the team when it explained the challenges that were to be faced this financial year.
“That the out-turn at the end of the first-quarter is below where Cranswick’s management expected it to be reflects most clearly, to our minds, the difficulties faced by the trade at present,” Black said.
Black described Cranswick as a “best in class” operator in the UK’s mid-cap staples market due to its skew towards mainstream meat categories and its “very well-invested facilities”. The production network, Black said, should give Cranswick ample scope for organic growth across its categories.
The processor has “strong traits” to deliver through the “unprecedented conditions” in the UK food retail industry and rising input costs, Black added.
“Cranswick is a company that we believe is still well set to deliver medium-term growth in returns, earnings and dividends for its investors and as such it remains a stock with strong positive traits,” said Black.
