Cranswick reports good start to year

However analyst Numis believes the upbeat start to the year will not last long as heavy competition in the retailing industry begins to affect the company's operations.

"We believe the trading environment for Cranswick will get progressively more challenging as aggressive changes in the retailing environment begin to take hold,"​ Numis stated inits analysis.

Cranswick is focused on the pet, agribusiness and food sectors. The company sells pig feed, pigs, pet food and food products. In 1998 the company began expanding its food processing business withthe acquisition of Lazenby's, a sausage manufacturer. In 1999 it bought Pethick, a ham manufacturer.

Further expansion took place in 2001 with the acquisition of Continental Fine Foods. The company bought North Wales Foods in 2002, the Sandwich Factory in 2003 and Perkins this year.

The company said it bought Perkins to give it additional sales power in the growing UK cooked meats market. Perkins produces pre-sliced and pre-packed meats, an area which Cranswick has beentargeting for future growth from its existing operations.

Due to the higher raw material costs to produce animal feed the company has consolidated its animal feed business and invested in new production capacity.

The company reported total sales for the first quarter of 2005 increased by 53 per cent to £109m, of which £33m was derived from Perkins Chilled Foods, which was acquired in January. Food salesfrom operations excluding Perkins increased by seven per cent to £68m, compared to the same quarter in 2004.

Within the £68m figure, sales of food products increased by 13 per cent with fresh pork, sandwiches and charcuterie showing particularly strong growth, according to a statement by Martin Davey,the company's chairman.

Animal feed sales fell by £2m to £4m reflecting the closure of Wellingore in the second quarter of last year, Davey said. Sales of gourmet bacon grew significantly from a low base. The petbusiness recorded a sales increase of one per cent.

However, since the company did not provide any figures for operating profit or on margins it is difficult to judge how much of the sales increase is due to the company's price reductions, accordingto analysts such as Numis.

For the financial year ended 31 March 2005 the company reported a profit before taxation of £23.6m before goodwill, amortisation and deductions for exceptional items. The profit represents a 12per cent increase over the previous financial year. No turnover figures were given for the year just ended.

In the year ended 31 March 2004, the company reported turnover of £270m, an increase of14 per cent, and a profit before tax of £21.2m

Davey said Perkins, acquired for £83.3m, is integrating well with the company's operations. The company recently sold its livestock herd in the North of England to a farming operation.

Cranswick will continue to supply feed from its mill in return for a supply of pigs to the company's processing plant in East Yorkshire.

In a report earlier this month, Farmers Weekly Interactive said its long term forecasts indicate that stable EU-wide pigmeat prices have helped to keep UK demand at "fairly firm levels".Feed wheat is being quoted at similar levels with reports of a good UK crop and large harvests in France and Germany despite the recent drought.