GOURMET sausage maker Cranswick is to sell its pig feed business in order to focus on its far more lucrative pork, sausage and sandwich products.
Driffield-based Cranswick was formed by farmers in the early 1970s to produce pig feed. Ten years ago it expanded into pork products and now specialises in premium sausages, pork, ham and bacon.
The Cranswick Mill pig feed business, the group's original activity, is being sold to BOCM Pauls, one of the two leading suppliers of animal feed.
The price was not disclosed, but Cranswick said it would make a one-off gain of £7m, consisting of a cash inflow from the sale and a reduction in working capital.
Cranswick chairman Martin Davey said the pig feed market had been particularly challenging in recent years following a substantial reduction in the UK pig herd. Despite some rationalisation, the market is still oversupplied.
"There is more capacity than required," said Mr Davey. "The deal makes sense for both BOCM and for us. This is a good opportunity for staff as BOCM intends to invest on site and expand the business." The pig feed operation is based at Cranswick in East Yorkshire.
Mr Davey said the pig feed business made sales of £25m in the past year, but achieved only a small profit.
He was speaking yesterday as Cranswick announced a 12 per cent increase in underlying pre-tax profits to £32.4m in the year to March 31.
Sales increased by 19 per cent to £525m and the company is recommending a 10 per cent increase in the final dividend to 12.2p a share.
Turnover in the food division rose 21 per cent to £493m, accounting for 94 per cent of the company's total sales.
The increase largely reflected organic growth although the acquisition of the sliced cooked meats business DeliCo added £9m in sales.
The group said it expected to see further increases in sales over the next year, but warned that there were signs that the trading environment was getting more competitive.
"We are seeing a reaction from competitors in certain categories," said Mr Davey, who declined to name which categories. "We hope to counteract this by focusing on new product development, service levels and running the business efficiently."
All of the group's food businesses showed strong growth in the premium sectors, with the star performers being sausages and bacon.
Much of the growth has come from sales to the gastro pub chains including Whitbread and Mitchells & Butlers.
While fresh pork sales in the UK grew by two per cent over the year, the Cranswick pork business saw an increase of 23 per cent.
It was a similar story with gourmet sausages. The total sausage market showed no growth in the year, while premium sausages rose by 19 per cent and Cranswick saw an impressive 28 per cent increase.
Bacon sales grew by 65 per cent and the group is planning to increase production capacity.
The sandwich division, which saw a five per cent increase in sales to £36m over the year, is poised to launch a new range of Duchy Original organic sandwiches this summer.