City analysts downgrade Cranswick

Leading City analysts have downgraded their forecast on Cranswick, the publicly listed pork producer, following the company’s latest update to the market.

Cranswick last week revealed that underlying sales were flat in the first three months of 2011 compared with the same period a year ago – down from the 5% growth in the previous quarter. Warning that the year ahead would be “demanding”, it posted an 8% rise in turnover to £384.3m in the six months to 30 September, while pre-tax profits lifted 12% to £23.8m.

The update has prompted Evolution Securities to downgrade Cranswick from buy to neutral – and its analysts warned on a decrease in earnings per share (EPS).

It said: “Cranswick’s sales slowed markedly in Q411 as the squeeze on UK consumers began to impact demand for all proteins including pork despite its relative discount. We downgrade our FY11E & FY12E EPS by -3% and -8% to reflect the backdrop of subdued demand and the likelihood of input cost pressure next year.”

The analysts said that Cranswick would be able to cope with an increase in the cost of pig meat – as it did in 2008/9 while protecting margins. They added Cranswick would have to gain ground with new contract wins to turn its fortunes around.

Evolution said: “We think the most likely source of new contract wins would be from Cranswick gaining further market share from struggling No.3 pork processor in the UK Vion.”


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