Carr’s Group sees squeezed margins and lower volumes in US
The UK headquartered agricultural, food and engineering group, released a trading update yesterday for the 26-week period ended 4 March.
It saw its shares slide following the announcement.
Carr’s Group manufacturers and supplies nutritional feed supplements through branded, and molasses-based feed licks, through a distribution network across the UK, Europe, Middle East and North America, made up of a mix of wholly owned and joint ventures.
Carrs Billington makes a range of compound animal feeds.
“Volumes and margins in our US feed block business have been under pressure as a result of falling cattle prices for producers. This pressure continued for a longer period than originally forecast and although cattle prices have begun to increase, the recovery in that market is now expected to be slower than anticipated.”
The USDA has predicted that beef cattle prices in the US will shift 30% lower than 2015 this year.
Dairy sector recovery in the UK
The Carlisle company’s trading updated noted that its UK agriculture division continues to see encouraging signs of returning customer confidence, driven by improving returns for dairy farmers.
“The UK agriculture business has continued to perform well and is now anticipated to exceed the Board's expectations for the current financial year.
“Feed blocks continue to be an exciting opportunity for growth, and our strategy of international expansion, particularly penetrating into some of the South American markets, remains unchanged.”
London based investment bank, VSA Capital, in a note on the trading update, also shared the positive outlook on the UK farming sector.
“Confidence continues to increase in the UK agriculture sector with UK milk prices +20% year-on-year and UK ruminant feed production, +c10% year-on-year.”
Moreover, VSA stressed that Carr’s remains well positioned to benefit from a variety of improving markets - nuclear, UK agriculture, US cattle - over the medium term.
The market analysts forecast full year pre-tax profit at Carr’s to fall 20% to £11.3m with a £3m hit in each division, offset by over-performance in remote handling and UK agriculture.
The company is to release its interim results on 12 April next.