Carr’s Milling shares soar on profit increase

Shares in Carr’s Milling Industries jumped 22 per cent on Monday after the animal feeds, fertiliser and flour group reported a 45 per cent increase in half-year profits.

Carr’s is benefiting from the sharply higher prices for wheat and fertiliser that it has been able to pass on to customers. Chris Holmes, chief executive, said the group also managed to increase market share.

Mr Holmes said: “Food inflation is here and here to stay.” The shares rose 107½p to 597½p.

Pre-tax profits for the six months to March rose from £3.57m to £5.17m. Lord Inglewood, chairman, said the results were “appreciably ahead of budget”. There was a “high degree of confidence in the outlook” for the year.

Improved trading conditions for farmers, particularly the dairy farmers who are Carr’s most important customers and who have seen a 50 per cent rise in their milk price, boosted its agriculture division.

Meanwhile, fertiliser sales more than doubled as volumes increased 60 per cent. Farmers had bought early fearing a shortage and anticipating higher prices.

Sales in the agriculture division rose 45 per cent to £119m and operating profit by 57 per cent to £4.02m.

The food division, which mills flour for bakers and to sell under its Carr’s Breadmaker brand, increased prices in September and November and benefited from cost savings. Mr Holmes expected prices to remain high. Sales in the division rose 58 per cent to £39.7m and operating profit by 21 per cent to £1.11m.

Carr’s engineering division suffered a 16 per cent drop in operating profit to £492,000, but was hit by one difficult contract due for completion shortly.

The interim dividend rises 9.1 per cent to 6p and earnings per share were up 46 per cent to 44.6p.

FT Comment

● After years watching its customers contend with BSE, foot and mouth and the general malaise in agriculture, Carr’s is enjoying the revival of the British farmer. With commodity prices expected to remain high, driven by population growth and expanding demand for bioethanol, Carr’s can expect a more profitable future. In the short term there is work to be done to improve margins in the food division and a rise in debt shows every silver lining has its cloud. With Investec, Carr’s broker, raising its forecast for the year by £500,000 to £7.6m, against £6.1m last year, the forward p/e of 9.1 still looks on the low side even after Monday’s share price rise.

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