UK: Wynnstay profits rise as feed volumes hit record levels and industry copes with Brexit related challenges
The Wales headquartered company posted a 24% rise in annual profit for the year ending October 31 2018, which it said exceeded market expectations amid improved farmgate prices. Its pre-tax profit from continuing operations rose to £9.5m, while revenue rose 18% to £462.6m.
The Wynnstay Group manufactures feed products at its facilities in Llansanfraid and Carmarthen as well as at a smaller facility at Rhosfawr. All of those plants are located in Wales. The company makes a broad range of ruminant and monogastric feeds, in both loose bulk and a variety of bagged sizes. It also sells raw materials to farmers and other feed manufacturers.
The business benefited from growing farmer confidence and the strengthening of output prices, said the Shore Capital team
They noted the long dry UK summer resulted in farmers purchasing additional feeds as farmer-grown forage was limited, and as a result, total volume of compound and blended feed products reached a record level.
“We note the positive behavioral trend, which is encouraging in the market as farmers have been upgrading to more premium forms of feeds compared to straights that are lower margin. Positively, feed demand has increased across all segments, more specifically in poultry and dairy.”
Trading for the new financial year has started in line with management expectations, added the Wynnstay Group.
UK agriculture sector adapting to Brexit related challenges
Shore Capital said that, over the last year, it has witnessed positive spending patterns, with the agriculture sector adapting to challenges related to Brexit.
“Despite the outcome of Brexit negotiations causing some level of uncertainty, we argue that UK agriculture has much more visibility over the short to medium term in comparison to some other industries. We regard this to be key as leaving the EU would suggest the UK becoming more self-sufficient in food production thus placing more importance to the future of UK agriculture and domestic agricultural supply chains in our view.
“Given the expected change in competitive dynamics between farmers looking forward, we believe Wynnstay is adapting to this transformation by continuing to invest in supply chain efficiency and production facilities development.
“The UK government has guaranteed farmers that they will continue to receive subsidies at current EU levels until 2022, which we believe should assist Wynnstay’s farming customer base going forward and give them sufficient time to adapt to market conditions post-Brexit,” wrote the analysts in a note on the results.
