US lifts Carr’s profit on deflationary sales

The Carr’s Group’s Agriculture division has reported an 8.8% rise in profit on xx % lower revenues from its latest full year of trading.

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The Group’s Agriculture division made a pre-tax profit of £12.74 million, including proceeds from joint venture and associate businesses, on revenues of £297.70m in the year ended August 29th 2015, compared to £12.10m and £314.93m in the previous full year. Lower demand for animal feed products in the UK, was balanced by good growth in overseas markets, demonstrating the value of the Group’s geographical spread, says Group chairman Chris Holmes.

The Group, which also comprises flour milling and engineering activities, made a profit of £17.47m on sales of £411.6m, from the £16.55m and £429.0m in fiscal 2014.

In the UK, lower farm incomes over the period, coupled with good supplies of excellent quality forage, resulted in reduced demand for compound feeds and intensified competition for feed orders in Carr’s trading areas.  These factors also led to lower sales of the company’s Crystalyx branded feed blocks. The 2014/15 mild winter and benign spring helped to lower costs of production for livestock farmers, which provided some respite from market conditions. However, overall feed volumes rose 4.1% year on year.

The division has also consolidated its feed operations in South Wales, following the acquisitions of WM Nicholls & Company in 2014 and B E Williams in 2013. These have been integrated into a central administrative base in Brecon, with a presence maintained in Sennybridge for the short term.

AminoMax, Carr’s patented dairy bypass protein product which is manufactured in the eastern US and the company’s Lancaster mill in the UK, saw flat worldwide sales in the period. This is also attributed to falling milk prices and farm incomes, while deflation in soya and oilseed feed ingredient values are expected to have an adverse impact on AminoMax revenues in the current year.

Sales of the company’s feed blocks in the US are described as “exceptional” with a 20% increase in line with favourable market and weather conditions. Recovery from drought in key regional markets there enabled producers to rebuild their beef herds and order more product. The Group’s investment to expand the feed block plant at Silver Springs, Nevada - acquired in June 2013 - will see manufacture of the Smartlic brand commence from this month.  This will allow the company to supply low moisture feedblocks to the West Coast dairy and beef markets for the first time.

Ongoing research and development has resulted in the launch of Piglyx, an environmental enrichment product reducing stress levels and tail biting incidence in pigs, and a research project into the yeast-based ruminant feed block Megastart which demonstrated significant benefits and a “substantial” increase in sales.   The company has exported its Horslyx equine leisure market product to the US for the first time and is also investigating market opportunities in Brazil for its Crystalyx feed block range. 

There was an 8.6% increase in revenues for the Carr’s Billington Agriculture retail chain of 30 stores and five auction market locations, with like-for-like sales up by 5.3%. The financial year saw a new store opened at Rothbury in Northumberland and the redevelopment of the Appleby and Selkirk outlets.  In June, Carr’s  acquired Reid and Robertson, an agricultural merchant business with an animal health specialism and bases in Balloch, Ayr and Oban to expand its  presence in Scotland Since the  year-end, it has bought Green (Agriculture), the merchanting business in  Morpeth located near the existing CBA machinery Country Store.

Carr’s oil distribution business, which reports into the Agriculture division, increased sales volumes by 4.4%, despite the benign weather and increased competition.

Looking ahead, chief executive Tim Davies expects the downturn in farmer confidence to continue into the medium term with low farmgate milk prices in the UK and internationally. “Many of our farming customers are starting to modify their spending in reaction to the ongoing uncertainty in the UK agriculture market, and are postponing sizable capital investments until they have further market visibility.

“While we remain cognisant of the uncertainty facing the UK agriculture sector, we believe that our strong regional presence, technical expertise, and diverse product offering provides a solid platform to service our customers’ needs through the next financial year and beyond,” Mr Davies concludes.