Market conditions leave analysts cautious about prospects for UK feed, agribusiness group

By Jane Byrne

- Last updated on GMT

© GettyImages/Caiaimage/Adam Gault
© GettyImages/Caiaimage/Adam Gault
The diversified business model and geographical exposure of the Carr’s Group, the UK agriculture and engineering outfit, limited adverse impacts from the drop in feed volumes caused by the mild autumn and winter experienced across the UK and Europe and lower revenues from machinery sales, say market analysts.

However, Shore Capital said while it is impossible to predict summer weather patterns, given the decline in farming sentiment it is seeing, it has downgraded its stock rating for Carr’s from buy to hold.  

Whilst Carr’s management expectations for FY2019 remain unchanged, the continued mild winter months and the availability of grassland in the UK is reducing farmers feed demand for livestock, said that equities research house.

When asked why it changed its stock rating on Carr’s today, given that the group published its interim results mid-April, Shore Capital analysts Akhil Patel told us:

“We have been sitting on a Buy stance and, several weeks on, we do not see the catalyst for Carr’s shares, from an agriculture perspective, to appreciate at this time.”

Feed production data 

Animal feed production statistics​ across the UK from March showed a decline of 5% year-on-year – cattle and calf: -3.9%, pig: -1.2%, poultry: -5.4% and sheep -19.9%, and the market has seen farmer confidence somewhat decline from January given the uncertainty around Brexit and the possibility at least of a no-deal Brexit, said the analyst.

Machinery sales can be used as a proxy for farmer confidence and a 10.2% decline in machinery revenues, albeit against record-high comparatives, does suggest the decision to delay any such investment until further clarity has been received, said Patel.

Tim Davies, CEO of Carr’s, commenting at the publication of the interim results in April, said: “Trading in the second half of the year has started in line with expectations, and the Board’s outlook for the full year remains unchanged. We also remain confident in the medium term prospects of the Group as we continue to invest across our divisions, expand our product offering and grow our international footprint.”

Carr’s manufactures feed blocks in a variety of its own and joint venture facilities located across the UK, Germany and the US; it manufactures boluses out of its own facility in the UK. These products are supplied through a distribution network across the UK, Europe, Middle East, New Zealand and North America. In addition, Carrs Billington produces a range of compound feeds.

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