The Carr's Group made a slightly reduced profit on 9.4% lower revenues from the first half of its financial year. The Group says its spread of interests and geographies helped offset a “deteriorating UK agricultural situation”.
The Group has reported a pre-tax profit of £10.5 million on revenues of £189.1m in the six months ended February 27th 2016, compared to £10.6m and £208.6m in H1 of the previous year.
First half operating profit for Carr’s Agriculture division was £7.43m on revenues of £139.3m, compared to £6.72m and £149.75m in H1 2015. The company says these are in line with expectations with a backdrop of continuing mild winter weather and low farmgate milk and livestock prices. In the UK, Carr’s compound feed volumes declined by 0.3% year-on-year, which is better than the national 4.3% market contraction, it notes. Feed block volumes fell by 2.8% in the same period. “Animal feed margins continue to be under pressure, due to the ongoing competitive landscape,” it says.
The pressure on farm incomes has also affected the farm machinery market, with Carr’s equipment sales down by 11.7% year on year. It expects this to continue throughout 2016 and into the next financial year.
The division’s Country Store network across Northern England and Southern Scotland reported a 2% increase in like-for-like sales. The June 2015 acquisition of Reid & Robertson with stores in Balloch, Ayr and Oban is fully integrated and making a positive contribution. The company also bought Green (Agriculture), the agricultural merchant based at Morpeth, for £300,000 to strengthen its presence in Northumberland.
Internationally, Carr’s says its wholly-owned feed block brands in the US, Smartlic and Feed in a Drum, saw sales volumes rise by 11.7%, helped by favourable weather conditions, the ongoing recovery increase in the size of the US beef herd, plus continuing investment in operations. The company’s new plant at Silver Springs, Nevada is now fully operational and able to help the initial plant at Belle Fourche, South Dakota meet increased demand. The full benefit of the Nevada facility will be realised in the next financial year.
In Europe, sales of the Crystalyx feed block fell 5.4% in line with continued low farm gate milk prices, with the contraction expected to last through H2. The period saw Carr’s launch its innovative product Piglyx, for the reduction of stress levels in pigs, particularly for export markets such as Asia.
Looking ahead, “the challenging UK farming environment is expected to have a continued impact on the Agriculture division during H2 and into the next financial year as farm incomes continue to be under pressure and farmers look to reduce input costs and delay replacing machinery,” notes the Group. “However, the diversification of the Agriculture division’s product offering and geographic spread is expected to partially mitigate the impact, with the strength of the US operations and the anticipated ongoing expansion of the beef herds through 2016 and into 2017 expected to continue to benefit the division.”
Group chief executive Tim Davies adds: “The Group is operating in challenging markets. However, our international presence and diversity has provided a robust H1 performance. Trading in the second half is as anticipated and we remain on track to meet the full year expectations of the board.
“The UK agricultural market has suffered from the depressed farm gate milk and livestock prices and we expect this to continue through 2016 and 2017, which will directly adversely impact our UK farm customers.”