Questor share tip: Cranswick expands pig farming

Cranswick
£11.73-35p
Questor says HOLD

Britain's largest pork processor, Cranswick, delivered a good set of annual results with revenue, profits and the dividend all increasing by double digits.

The FTSE 250-listed sausage maker reported pre-tax profits up 18pc to £54.8m on revenues up 14pc to £994.9m. The profit performance last year was hit by high pig prices, which peaked in July. Pig prices have fallen from a record high of 173p per kilogram before Christmas, to about 163p.

To mitigate the impact of this, Cranswick has been expanding its pig breeding and growing facilities. The company now supplies 15pc to 20pc of its weekly meat demand from its own farms.

The company is also trying to move into other profitable areas than just sausages. It has invested £20m in its production facilities during the past 12 months, including a new gourmet pastry facility in Malton, North Yorkshire.

Martin Davey, chairman, said: “This has been a positive, albeit challenging, year for Cranswick.

“The business had to contend with record input prices, the impact on its customer base of the changing dynamics of UK food retailing and an environment where the consumer has been subject to ongoing financial constraints.”

Market consensus is for the company to have a fairly flat year, revenue will increase to £1.04bn and pre-tax profits will rise 2pc to £55.8m.

This leaves the shares trading on a forecast price-earnings ratio of 13.5 times and offering a dividend yield of 2.9pc.

We still think this company is a core holding as it delivers a steady profit performance and decent dividend growth but, for now, it remains a hold.