UK food producer Cranswick (LON:CWK) flagged a positive start to FY27 and reaffirmed annual profit guidance.
The pork-to-poultry processor delivered broad-based growth in Q1. Recent investments are translating into tasty market share gains across its poultry, pet food and houmous businesses.
So why did the shares fall in early dealings? Well, a deceleration in growth, lower exports and the absence of another earnings upgrade triggered profit-taking.
Robust demand
Over the last 51 years, Cranswick has grown from a single mill producing feed for pigs in the North East of England into a major UK food producer. The company services major UK grocery chains and the foodservice sector and also has a fast-growing pet food business.
For the 13 weeks to 27 June, Cranswick served up a 5.5% rise in reported revenue driven by strong volume growth of 8.2%. However, like-for-like revenue growth slowed to 4% as Cranswick passed the benefit of lower pig prices onto customers.
‘Growth reflected robust demand across our core product portfolio,’ said Cranswick. This was ‘driven by the UK consumers’ growing prioritisation of a healthy, protein rich and nutritionally balanced diet’.
Management remains mindful of the potential for disruption arising from the Middle East war and the changing domestic political landscape.
Nevertheless, Cranswick remains confident of delivering FY27 adjusted pre-tax profits in the £230 million to £243 million range. In FY26, the company cooked up profits of £215.8 million.
Key growth engine
The poultry category is a key growth engine for Cranswick and revenue in this part of the business grew strongly in Q1. CEO Adam Couch said the significant investment Cranswick is making in its Eye facility ‘will create the headroom for further expansion in this exciting category’.
While Cranswick generated double-digit retail volume growth in domestic fresh pork sales, export revenue was lower year-on-year. This reflected subdued demand from China and other global markets and certain products being redirected into the UK wholesale trade.
Convenience and gourmet products revenues were up year-on-year. Cranswick called out ‘particularly strong houmous and dips revenue growth’ in Q1 boosted by favourable weather and a World Cup benefit. Pet products revenue was ‘well ahead’ year-on-year. This reflected the ongoing expansion of Cranswick’s relationship with fellow FTSE 250 constituent Pets at Home (LON:PETS).
Compounding growth
Couch added: ‘Our continued compounding growth reflects the increasing competitive advantage of our vertically integrated supply chain and record capital deployment across our asset base to increase capacity, add capability, drive efficiencies and deliver strong returns.’
Cranswick remains one of our favourite food stocks given its record of generating robust growth and beating earnings estimates. The investment case is further underpinned by the structural growth in UK protein consumption. The company has a leading market position in the value elements of protein, pork, and poultry.
The cash generative firm remains on course for another year of profits growth. And Cranswick has a strong balance sheet and a 36-year record of unbroken dividend growth. However, these admirable qualities are reflected in a premium rating.
For FY27, Shore Capital sees revenue topping £3.1 million and forecasts a jump in adjusted pre-tax profits from £220 million to £230.4 million. But the broker says these estimates are conservatively-pitched, so there could be earnings upgrades to come.
Shore Capital stressed that while Cranswick’s headline numbers are certainly impressive, ‘the quality of the growth is even more important in our view given the strength of volume growth in a UK grocery market that has been more constrained over the past twelve months’. The broker added: ‘Cranswick’s exposure to the grocery winners has certainly been a help in this regard.’
Read the press release here: https://cranswick.plc.uk/investors
