The Carr’s Group has reported a resilient performance from its Agriculture division in the first half of its 2020 financial year, despite challenging market conditions and unseasonable weather that saw a 10% fall in feed volumes and pressure on margins.
An earlier trading update had warned of lower feed and supplement volumes helping to lower the board’s expectations for the current financial year, before the Covid-19 crisis broke. Directors say they still anticipate a full year outcome “broadly in line with those revised expectations” while “remaining acutely aware of possible interruptions due to Covid-19” although it had not seen any material adverse direct impact to date. All UK and overseas manufacturing facilities and UK retail network remain operational, while under Covid-19 control measures.
The Agriculture division posted an operating profit of £10m on revenues of £175m in the six months to February 29th 2020, compared to £10.6m and £185.2m in the first half 2019, respective falls of 5.8% and 5.5% to (H1 2019: £185.2m). Adjusted operating profit fell 15.5% to £9.0m (H1 2019: £10.7m).
The company says that the “sustained mild winter and ongoing market pressures” in the UK resulted in a 10% decline in total compound feed volumes year-on-year, a similar reduction to that of national feed manufacturing. UK feed block and supplement sales were lower than expected for the same reasons.
“In the period, we improved procurement and manufacturing processes in order to maximise efficiencies, including realising buying synergies on key raw materials and introducing least cost formulation software at UK manufacturing sites, which helped to partially mitigate the effect of the difficult trading conditions on profitability,” it notes.
The Carr’s Billington Agriculture rural retailing business performed resiliently with like-for-like sales up by 2%. Overall sales were 1% higher following further store rationalisation in the wake of Carr’s acquisition of Pearson Farm Supplies in 2017. Revenues from farm machinery sales were 20% up in the period, ahead of management’s expectations, from a low prior year result when farmer confidence to invest was constrained by the 2019 political stalemate over Brexit.
The Group’s fuel distribution business, which reports through the Agriculture division, saw volumes fall by 6% from the prior year, again due to the mild winter.
Internationally, the division’s total feedblock volumes were similar to first half 2019. The joint venture feedblock manufacturing operation in Germany, Crystalyx Products, was affected by similar weather to the UK, with a 2% fall in volumes. But a new production facility at Oldenburg making the Pick Block range of feedblocks designed to enhance poultry welfare standards came on-stream during the period, and its sales volumes are beginning to grow.
In North America, low moisture feed block volumes from Carr’s Tennessee manufacturing plant helped to grow the company’s geographic footprint across the eastern and south-eastern US. It has also launched a new product, FesCool, trialled with Kansas State University. The low moisture feed block improves the performance of grazing cattle by reducing the impact of fescue toxicity.
Carr’s has increased its presence in Canada, targeting the beef cattle market, with new distribution partners, an expanded sales presence and product registrations all serviced from its South Dakota base in the US.
The company notes a fall in demand for livestock trace element supplements made by Animax, the Suffolk-based business it acquired two years ago, due to market pressures and the milder weather. The business has invested in its sales force and in automating its manufacturing.
“In challenging market conditions, with significant headwinds experienced in both divisions, we have delivered a resilient performance in the period,“ says Group chief executive Tim Davies. “While there remains significant uncertainty over the impact of COVID-19, we are moving decisively on all fronts to address these challenges, ensuring we conserve cash and maintain a robust financial position.
“We are confident that our approach and robust business model will ensure the Group is well placed to endure this period of uncertainty and continue to deliver growth in the medium term.”