The food, feed, engineering and retail company released a trading update for the 18 weeks up to 7 January 2017. It said the group continued to perform in line with expectations [FactSet consensus: revenues of £328.5m ($399.07m), +4.3% year-on-year (YoY), profit before taxes (PBT) of £14.4m, +2.1% YoY].
Carr’s, which has UK and international feed divisions, reported its compound feed and fuel volumes are ahead YoY, with machinery sales showing signs of recovery in Q1.
Retail sales were also ahead of expectations as were UK feedblock sales YoY but US feedblock sales were flat YoY.
“Carr’s again delivered compound feed volumes ahead of the overall UK ruminant animal feed market, which fell 0.7% YoY for September and October (November and December data not yet available) and again highlighting the market share gains that the larger producers are making.
“With an improved outlook for farmers in 2017, particularly those in dairy, we believe the environment will continue to be beneficial for Carr’s for its remaining FY,” said VSA Capital analysts in a note.
UK cattle feed demand
They said Carr’s will be keeping a close eye now on UK demand for cattle and calf feed, for which the “overall monthly YoY production decreases are moderating but have some way to go to reverse course, due to milk production continuing to be significantly lower YoY in recent months (last available data: -7.3% YoY in November, -4.2% YTD), despite steadily increasing milk prices.”
Carr’s had previously warned that US feedblock sales were set to slow as low US cattle prices begin to impact producers.
VSA Capital analysts said the group’s new facility in Tennessee, expected to open by autumn 2017, should help a return to growth in this area over the medium-term.
“Although US cattle prices has staged somewhat of a recovery over the last two months, they remain significantly below those seen in 2014 and 2015 and farmers will need time to adjust to what may be a new normal,” said the VSA market insiders.
They noted that, with £32.5m of undrawn facilities, Carr’s has the firepower to make significant acquisitions in the coming year “and we expect it will do.”
But VSA acknowledged the considerable uncertainty over the medium term around agriculture policy post Brexit: “At the recent Oxford Farming Conference, Andrea Leadsom, Secretary of State for Environment, Food and Rural Affairs, outlined some of her views on this particular issue and professed her strong support for UK farmers, but it is also clear that much of detail remains unknown.
“Assessing the recent commentary, it seems that post-Brexit a focus on farming efficiency and high quality production seems most likely. This should support demand for Carr’s products in the market, which are particularly focused towards this segment of the UK farming sector.”
Carr’s said it expects to issue its interim results for the 26-week period ending 4 March next on 12 April 2017.