CONSUMERS face a further rise in the cost of their breakfast bacon and bangers after pork supplier Cranswick yesterday revealed it is in talks with its supermarket customers to pass on further increases in pig prices.
The Hull-based company, which supplies pork to Sainsbury’s and Tesco, reiterated its warning that pig prices have hit a three-year high due to higher feed costs and tighter welfare standards being introduced by the European Union (EU).
City analysts said supermarkets are happy to pay higher prices for their pork to ensure security of supply following Dutch group Vion’s decision to close its Hall’s of Broxburn plant in West Lothian and sell off the rest of its UK business.
Cranswick – which also supplies meat for products made under the Jamie Oliver and Weightwatchers brands – yesterday posted a 21 per cent rise in pre-tax profits for the six months to £22.5 million after previous price rises kicked in.
Revenues edged up by 6 per cent to £418.6m following the takeover of Kingston Foods, with the interim dividend rising to 9.4p from 9p.
Cranswick chairman Martin Davey said: “Rising input costs were a feature of trading during the period and this has continued into the second half, although efficiency improvements brought about by investment undertaken by the business and ongoing constructive pricing discussions with customers have helped offset the full impact of this.”
Although pork prices have continued to climb, analysts said there is unlikely to be a spike in the run-up to Christmas, with costs rising more slowly over the past few weeks. Hard-pressed shoppers are continuing to buy pork instead of more-expensive meats such as beef and lamb.
Cranswick reported a 15 per cent rise in sausage sales, with cooked meats up 10 per cent, bacon 6 per cent higher and continental meats up 2 per cent despite the loss of a contract with Asda.
Charles Hall, an analyst at Peel Hunt, said: “There has been a significant increase in the pig price – from circa 140p per kg to 160p – and there was concern Cranswick could see a significant squeeze on margins. However, the company has managed to secure price increases to largely offset the higher pig prices.
“Security of supply is increasingly being seen as a key issue, particularly with Vion’s UK business up for sale and a reduction in the size of the pig herd.”
Hall added: “There is still a risk of higher pricing, given the change in EU regulations in January, although this now appears less daunting.”
Numis Securities analyst Charles Pick noted: “The key point here is the mention of ‘ongoing constructive pricing discussions with customers’. Higher pricing is needed to address the rise in input costs, mainly pig meat, seen in the first half of the year and expected to continue into the second half of the year.”
Darren Shirley, an analyst at house broker Shore Capital, said he was “reassured” by the interim results and left his full-year pre-tax profit prediction unchanged at £48m.
Cranswick closed up 10 per cent or 73.5p at 812.5p, having hit 830p earlier in the session.