Cranswick plc (LON:CWK) has warned its margins will likely come under pressure in its next financial year, sending shares in the sausage maker plunging.
The FTSE 250 meat processor, which also makes Weight Watchers sausages and bacon, blamed the “potentially challenging commercial landscape” and build costs at its new £54mln poultry plant in Eye for the expected decline in profitability.
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Work has been underway at Eye since last summer and is it set to open this time next year.
Cranswick’s expectations for the current trading year remain unchanged, despite reporting a 2% fall in third-quarter revenue, which was worse than analysts had been expecting.
There was some good news for its poultry business though as it secured a new contract with WM Morrison Supermarkets PLC (LON:MRW), which will see it supply the grocer with a range of fresh and cooked poultry products.
City broker slashes forecasts
City broker Peel Hunt said the “poor trading and more competitive market outweigh [the] positive news on poultry”.
Analysts there cut their forecasts for 4% for the current year and now expect an adjusted pre-tax profit of £92mln (previously £96mln). They have also slashed their numbers for next year and 2021 as well.
Peel Hunt repeated its ‘hold’ recommendation but trimmed its target price to 2,600p from 2,800p.
Cranswick shares fell 20% to 2,374p on Thursday morning. They had peaked at 3,500p back in October.