Cranswick plucks at margins amid poultry investment, tough market

Meat packer Cranswick tumbled as it said revenue edged down over the festive period and operating margin was likely to decline.

Sales in the third quarter were down 2% against a double-digit period a year before.

Pricing has been impacted by a 7% year-on-year fall in pig prices, counterbalancing strong growth in poultry and continental products.

The FTSE 250 group felt the festive performance was "robust" thanks to strong cost control and operational efficiencies.

House broker Shore Capital said it believes volumes have been declining at an estimated 3%, albeit offset by positive sales mix.

Cranswick said it continues to invest at record levels to increase capacity, add new capability and drive further operating efficiencies, while keeping up standards at all facilities.

Investment in construction of a new poultry processing facility in Eye, Suffolk ahead of commissioning towards the end of the next financial year.

For the coming financial year, this investment plus a "potentially challenging commercial landscape", means operating margin is "likely to decline".

Management see these as only short-term challenges, believing there is a "solid platform" to drive future poultry growth.

ShoreCap cut its pre-tax profit forecast for the current year 3% to £92.5m, with earnings per share of 144.5p, to reflect what it sees as volume weakness.

Looking into the 2020 financial year, with the highlighed “challenging commercial landscape” and poultry start-up costs, profit forecasts are slashed 15% to £85.0m and EPS to 133p.