15 July 2013
Carr's (CRM.L), the agriculture, food and engineering group, announces its second Interim Management Statement for the year ending 31 August 2013, as required by the UK Listing Authority's Disclosure and Transparency Rules.
The Statement relates to the 18 week period ended 6 July 2013.
The financial performance of Carr's has benefited from a continuation of strong growth in activity achieved in the first half, reflecting further development across the Group and successful international expansion. Taking into account the normally lower levels of seasonal trading for the final quarter, the Board is confident that Carr's will deliver strong earnings growth in line with the Company's expectations.
The beneficial impact on revenue and profit of the Agriculture division from one-off weather-related factors, referred to in our interim results announcement in March, continued through to May. In the UK, the cold and wet conditions persisted through Easter and beyond, which stimulated a high level of sales of compound feed, feed blocks, animal health products and fuel. In the USA, the combination of droughts and a generally harsh winter resulted in poor quality forage in the spring, which increased the market for feed blocks.
Demand for our feed blocks continues to grow strongly in the USA, UK, mainland Europe and New Zealand. A substantial amount of the growth relates to greater recognition of our brands, including: Crystalyx™, Smartlic™, Feed in a Drum™ and Horslyx™, based on increased awareness of the benefits to livestock performance.
AminoMax™, the patented rumen bypass protein for dairy cattle, is now achieving record production from the operation at Watertown, New York State. Revenue and profit from this 50% joint venture are meeting targets, and as a result of increasing customer demand £1.6 million is being invested to increase capacity at Watertown, with completion due by November 2013.
The 100% owned AminoMax™ plant at Lancaster opened in June to launch the added value product in the UK market. The plant uses the proven manufacturing technologies and processes pioneered at Watertown, and early indications of the reception for AminoMax™ from UK dairy farmers are encouraging.
The UK retail network continues to perform well, although sales of farm machinery have fallen reflecting the pressure on farm incomes. The investment in our flagship store at Carlisle has been successfully completed in line with our on-going investment strategy for our retail network.
The financial performance of our milling business, operating in an industry plagued by over-capacity and volatile input prices for years, has begun to improve. As with the Agriculture division, weather-related factors have had a beneficial impact; the exceptionally poor UK harvest of 2012 has led to a significantly greater dependence on overseas wheat and the port-side location of two of our three mills (Kirkcaldy and Silloth) continues to give Carr's cost-effective access to overseas wheat. Given the cold and wet conditions of this winter and spring, the outlook is for another low volume harvest in 2013 and possible further reliance on overseas wheat.
The closure of a competitor mill at Glasgow in March 2013 eased some capacity-related pressures in the Scottish market. The new state-of-the-art mill being built at Kirkcaldy is on track for commissioning in September, with the planned significant efficiencies and improvements in operating margins coming through next year.
The division continued to build revenues strongly, maintaining the momentum established in 2012 as a result of increasing global demand for remote handling equipment and robotics from the nuclear and petrochemical industries.
Wälischmiller, based in Markdorf in Southern Germany, continues to enjoy buoyant demand for its remote handling and robotics products including the Telbot™ and bespoke special purpose manipulators. Several major contracts have been completed in the period and the order book continues to be healthy. The redevelopment of the factory and offices at Markdorf will be completed by the end of November 2013, enhancing productivity and efficiencies, as well as providing some additional capacity.
Bendalls' major multi-million dollar contract with Hyundai to supply pressure vessels for BP Quad 204, west of the Shetland Islands, will be substantially completed by the end of the financial year with the remainder delivered by the end of the current calendar year.
The sales momentum at Carrs MSM accelerated during the period with the business benefiting from the ‘life of plant' contract at Sellafield, and financial performance is ahead of budget. The growing importance of Carrs MSM to the Engineering division is underpinned by sales visibility through to 2020.
In line with our strategy of increasing our international footprint in the feed block market, we announced the acquisition of Western Feed Supplements, a low moisture feed block manufacturer, in June for £0.6 million. The plant, based in Silver Springs, Nevada, now enables Carr's to supply the West Coast dairy and beef markets with low moisture feed blocks. Further investment in greater capacity and modernisation of the plant is underway.
At 1 June, net debt was £28.4 million, up £25.9 million from £2.5 million at 1 September 2012. The movement is largely explained by the planned capital expenditure programmes across all three divisions. However, the longer winter and associated higher levels of demand have increased working capital requirements over the third quarter. Undrawn committed facilities at the end of Q3 were £16.3 million.
A second interim dividend of 7.75 pence per share (2012: 7.25 pence per share) will be paid on 11 October 2013 to shareholders on the register on 20 September 2013. The ex-dividend date will be 18 September 2013.
|Carr's Group plc
Tim Davies (Chief Executive Officer)
Neil Austin (Finance Director)
|Bankside Consultants Limited