Panmure Gordon & Co advised investors to hold onto stock, but lowered the price to 800p, citing the uncertainty surrounding margins in the second half of 2013 due to higher pork prices. It said that price negotiations are likely to remain the focus of the processors’ interim report, due to be released on 26 November.
Analyst Damian McNeela forecast a return to “normal margins”, with operating profits up 26% to £23.9m, and adjusted profit before tax up 29% to £23.4m. This, he said was driven by the return to more normal margins following a lag in recovering higher pork prices during the first half of 2012. UK pork prices, he noted, have continued to rise, and the DAPP currently stands at 160.0p/kg.
He said: “Any progress with regard pricing negotiations with UK retailers is going to be a key focus ahead of the busy Christmas trading period.”
“The upward pressure is being created by higher feed costs and uncertainty over supply building with the EU ban on stow stalls coming into force from 1 January 2013. Pork prices tend to decline seasonally over the autumn but this year that has not been the case. This has resulted in Cranswick entering into negotiations, unprecedented for this time of year, with the retailers.
“Given the importance of securing price increases ahead of the busy Christmas period we believe there will be a focus on the progress being made in this regard.
In the six months to 20 September, the company announced a turnover that was 5% ahead of the same period last year and total sales up by 6%. It attributed to the versatility and the low relative price of pork to other proteins, and the board said it was confident in the continued long-term development of the business. However it said that the rising cost of feed and the likely contraction in the EU pig herd had necessitate discussions on price increases with the group’s customers, which were “underway”.