Sector spotlight: food producers

This week's sector spotlight is on food producers. Are there any companies in this sector that could be attractive for investors?

Article updated: 19 August 2020 2:00pm Author: Michael Baxter

The food sector boasts a handful of very large companies, including Unilever. In theory, one would not have expected Covid to have had that much of a negative effect on the sector, with a few exceptions.

Let's take a look at the companies. This report only looks at companies with a market cap of over £50m. It is not that companies with a lower valuation are not necessarily bad investments, but investing in small caps is a risky area and usually only for investors with specialist knowledge of the companies in question.

Below, numbers are in pounds or pence, unless stated otherwise.

Associated British Foods

Particularly known for Primark and its sugar business, Associated British Foods products also include Twinnings, Allied Bakeries and Ovaltine.

Primark is a key part of the business, post- Covid, will fast fashion remain so popular?

In the 40 weeks ended June 20th 2020, group revenue was 13% lower than the same period last year at constant currency and 14% lower at actual exchange rates.

It said: "For the full year we continue to expect strong progress in the aggregate adjusted operating profit of our Sugar, Grocery, Agriculture and Ingredients businesses. This will be mainly driven by a material increase in profit at AB Sugar and another year of good margin and profit growth in Grocery.

"Nearly all Primark stores are now trading again, and we estimate that, absent a significant number of further store closures, adjusted operating profit for Primark, excluding exceptional charges, will be in the range £300-350m for the full year compared to £913m reported for the last financial year."

Share price 1951p
2020 high 2708p
2020 low 1607p
Five year high (2015) 3516p
All-time high (2015) 3516p
Change last 12 months -14%
Change last 5 years -40%
Change since 1988 1209%
Market cap £15,450m
Yield 2.38
P/E 18
Revenue growth since 2015 23.6%
Pre-tax profits growth 65.9%
Total assets/total liabilities 3.3%
Current assets/total liabilities 1.3%
Current assets/current liabilities 1.8%
net assets £9550.0m

Anglo-Eastern Plantations

Anglo-Eastern Plantations operates palm oil and rubber plantations in Indonesia and Malaysia.

Most recent results were boosted by 'unusual numbers.'

Share price 496p
2020 high 617p
2020 low 336p
Five year high (2017) 880p
All-time high (2017) 880p
Change last 12 months 7%
Change last five years -17%
Change since 1995 391%
Market cap £197m
Yield 0.08
P/E 16
Revenue growth since 2015 -11.0%
Pre-tax profits growth -68.9%
Total assets/total liabilities 9.9%
Current assets/total liabilities 2.8%
Current assets/current liabilities 5.8%
net assets £496.0m

Carr's Group

Carr's Group offers a range of services including the design, manufacture and supply of bespoke equipment and remote handling machinery. It also manufactures supplements for livestock and operates a UK network of rural farm stores.

It consists of two divisions, agriculture and engineering, and spans the UK, Europe and North America, supplying over 50 countries around the world.

In the 19 weeks to July 11th, it maintained dividend, agriculture trading was ahead of expectations, in the UK. It said: "Farmers are maintaining normal livestock operations, and a marginally higher demand for feeds, supplements and fuels has enhanced revenues."

Share price 135p
2020 high 160p
2020 low 88p
Five year high (2017) 172p
All-time high (2014) 190p
Change last 12 months -7%
Change last five years -18%
Change since 1995 335%
Market cap £125m
Yield 1.85
P/E 10
Revenue growth since 2015 22.1%
Pre-tax profits growth 14.3%
Total assets/total liabilities 2.0%
Current assets/total liabilities 1.1%
Current assets/current liabilities 1.6%
net assets £131.0m

Cranswick

Originally founded by farmers in 1970s to produce pig feed, today Cranswick focuses predominantly on the supply of fresh and processed food to the UK food retail, food manufacturing and foodservice categories.

It says that it produces "only the best quality food, efficiently, and sustainably in well-invested facilities across the UK."

It recently announced a 16% increase in revenue and a 13.9% increase in profits. It has been paying a dividend for 30 years, with no interruption, and recently announced an increase in dividends.

Share price 3792p
2020 high 4000p
2020 low 2922p
Five year high (2020) 4000p
All-time high (2020) 4000p
Change last 12 months 46%
Change last 5 years 129%
Change since 1995 4209%
Market cap £1,983m
Yield 1.59
P/E 24
Revenue growth since 2015 15.4%
Pre-tax profits growth 11.5%
Total assets/total liabilities 3.9%
Current assets/total liabilities 1.5%
Current assets/current liabilities 1.7%
net assets £535.0m

Devro

Devro makes and sells sausages globally. It says: "We bring physics, chemistry, biology, engineering and food science together, to create the perfect casing for every sausage application."

For the first half of this year, revenue as very slightly down on the year before, profits were up 7%.

Rutger Helbing, Chief Executive Officer of Devro, said: "Whilst trading conditions remain uncertain due to Covid-19, the Board expects, based on underlying growth momentum and supported by cost savings actions, and FX at current rates, to make progress during 2020.

"We are also pleased to declare both an interim dividend, as well as the postponed 2019 final, reflecting our financial position and robust trading performance."

Share price 179p
2020 high 179p
2020 low 126p
Five year high (2016) 317p
All-time high (1993) 545p
Change last 12 months -8%
Change last 5 years -41%
Change since 1993 -7%
Market cap £299m
Yield 5.03
P/E -7
Revenue growth since 2015 8.7%
Pre-tax profits growth -246.7%
Total assets/total liabilities 1.3%
Current assets/total liabilities 0.3%
Current assets/current liabilities 2.4%
net assets £75.0m

Finsbury Food Group

It became Finsbury Food Group in 2002. The company consists of a UK bakery, food service, licensed brands, and international. Dividends have increased each year since 2013.

Licensed brands include Disney, Thorntons, and Weight Watchers. Its products include a chocolate Guinness Cake and at Christmas time a Baileys Chocolate Yule Log.

Share price 57.6p
2020 high 103p
2020 low 53p
Five year high (2016) 135p
All-time high (2016) 135p
Change last 12 months -13%
Change last 5 years -42%
Change since 1996 -45%
Market cap £75m
Yield 6.08
P/E 8
Revenue growth since 2015 -32.8%
Pre-tax profits growth 16.7%
Total assets/total liabilities 1.9%
Current assets/total liabilities 0.6%
Current assets/current liabilities 1.3%
net assets £109.0m

Glanbia

Glanbia is a global nutrition company; it says it is "grounded in science and nature and dedicated to providing better nutrition for every step of life's journey."

It employs "over 7,385 people across 34 countries and," its "products are sold or distributed in over 100 countries with revenue of €3.9 billion in 2019.

"Major production facilities are located in Ireland, the US, the UK, Germany and China. We have three segments; Glanbia Performance Nutrition, Glanbia Nutritionals and Joint Ventures & Associates.

Earnings fell 25.4% in the first half; revenues increased 2.3%. Siobhán Talbot, who is the Group Managing Director, talked about Covid's impact on the first half of this year. She said it brought "extraordinary challenges" and added: "I am hugely appreciative of the agility, dedication and commitment that Glanbia employees and particularly our frontline workers, suppliers, and customer partners showed in quickly adopting new radical ways of working and maintaining operations throughout the pandemic."

Share price (in euros) 9.34
2020 high 11.45
2020 low 7.68
Five year high (2016) 18.6
All-time high (2015) 19.36
Change last 12 months -14%
Change last 5 years -47%
Change since 1999 514%
Market cap €2,747m
Yield 2.87
P/E 15
Revenue growth since 2015 22.2%
Pre-tax profits growth -25.5%
Total assets/total liabilities 2.0%
Current assets/total liabilities 0.7%
Current assets/current liabilities 1.2%
net assets €1702.0m

Bluejay Mining

Bluejay Mining is "focused on advancing its primary Dundas Ilmenite Project in Greenland, the world's most significant, highest-grade mineral sand ilmenite deposit, into production in the near term and driving value through the development of its other large scale high-grade projects providing exposure to commodities including nickel, copper, lead zinc and platinum."

According to Wikipedia, Ilmenite "is the main source of titanium dioxide, which is used in paints, printing inks, fabrics, plastics, paper, sunscreen, food and cosmetics." 

Share price 7.5p
2020 high 8.96p
2020 low 3.27p
Five year high (2016) 26p
All-time high (2019) 4000p
Change last 12 months 25%
Change last 5 years 464%
Change since 1996 -100%
Market cap £73m
Yield 0
P/E -36
Pre-tax profits growth -421.4%
Total assets/total liabilities 20.2%
Current assets/total liabilities 6.3%
Current assets/current liabilities 8.9%
net assets £36m

Kerry Group

Based in Ireland, Kerry Group "supplies over 15,000 foods, food ingredients and flavour products to customers in more than 140 countries worldwide."

Share price (in euros) 108p
2020 high 125p
2020 low 92.5p
Five year high (2020) 125p
All-time high (2020) 135p
Change last 12 months 2%
Change last 5 years 57%
Change since 1988 800%
Market cap €19,099m
Yield 0.73
P/E 34
Revenue growth since 2015 18.6%
Pre-tax profits growth 7.1%
Total assets/total liabilities 1.9%
Current assets/total liabilities 0.5%
Current assets/current liabilities 1.3%
net assets €4562.0m

MP Evans

MP Evans focuses on what it calls sustainable palm oil in Indonesia. It has been harvesting a larger area while yields per tonne have been increasing. It recently announced that it is maintaining its dividend.

Share price 580p
2020 high 718p
2020 low 400p
Five year high (2017) 820p
All-time high (2017) 820p
Change last 12 months -14%
Change last 5 years 44%
Change since 1993 1315%
Market cap £327m
Yield 2.96
P/E 68
Revenue growth since 2015 41.7%
Pre-tax profits growth -31.6%
Total assets/total liabilities 3.6%
Current assets/total liabilities 0.6%
Current assets/current liabilities 1.7%
net assets £368.0m

Origin Enterprises

Origin Enterprises provides "specialist on-farm agronomy services, digital agricultural services and the supply of crop technologies and inputs."

Revenues fell in the first half, and reported an operating loss. Chief Executive Tom O'Mahony, said: "It has been a challenging first six months for the Group. Operating conditions faced by farmers and growers, principally in the UK, due to intense and prolonged rainfall has led to a 40% year-on-year reduction in the level of autumn and winter crop plantings."

Share price (in euros) 3.12
2020 high 3.9
2020 low 2.11
Five year high (2015) 7.7
All-time high (2015) 9.07
Change last 12 months -36%
Change last 5 years -59%
Change since 2007 -11%
Market cap €404m
Yield 6.66
P/E 8
Revenue growth since 2015 18.2%
Pre-tax profits growth -7.6%
Total assets/total liabilities 1.4%
Current assets/total liabilities 0.9%
Current assets/current liabilities 1.2%
net assets €346.0m

Tate & Lyle

Sugar doesn't have such a good rap these days, Tate & Lyle has responded with low and no-calorie sweeteners, and what it calls "gut-friendly fibres." It also produces "creamy, tasty treats," and various other food products.

In the three months to June 30th 2020, revenue increased 5%. Nick Hampton, Chief Executive, said: "As expected, the first quarter presented many challenges, and I am very proud of the way we are navigating the impact of Covid-19. We are encouraged by the improvement in demand we saw in June and the continued strategic progress we are making, with new product revenue growing 9% in the quarter. Our new business pipeline is healthy, we continue to find creative ways to use technology to support and connect with our customers, and all our manufacturing facilities remain fully operational."

Share price 684p
2020 high 800p
2020 low 530p
Five year high (2020) 800p
All-time high (2013) 862p
Change last 12 months -5%
Change last 5 years 25%
Change since 1995 64%
Market cap £3,200m
Yield 4.33
P/E 13
Revenue growth since 2015 4.7%
Pre-tax profits growth 27.0%
Total assets/total liabilities 2.0%
Current assets/total liabilities 0.8%
Current assets/current liabilities 2.4%
net assets £1399.0m

Unilever

One of the biggest companies listed on the London Stock Exchange; products include many famous brands including PG Tips, Persil, Domestos, Hellmans, Magnum, Knorr, Dove, Toni & Guy, Ben & Gerry's, Colman's, Lyons and Marmite.

The Share Centre has Unilever as a buy, and I have often opined on the impressive way it has adopted digital

Its latest half-yearly results revealed a 1% fall in revenue and a 3.8% increase in underlying profits, but currency fluctuations hit total profits.

CEO Alan Jope said: "In the second half of the year, we expect to see higher brand and marketing investment, as lockdowns ease and we support brand campaigns and product innovations tailored to the new environment."

Share price 4475p
2020 high 4758p
2020 low 3726p
Five year high (2019) 5196p
All-time high (2019) 5196p
Change last 12 months -10%
Change last 5 years 59%
Change since 1995 40%
Market cap £117,408m
Yield 3.19
P/E 24
Revenue growth since 2015 -1.4%
Pre-tax profits growth 11.0%
Total assets/total liabilities 1.3%
Current assets/total liabilities 0.3%
Current assets/current liabilities 0.8%
net assets £13886.0m

Wynnstay Group

Wynnstay provides a range of agricultural services for Dairy, Beef, Sheep and Arable farmers.

In its latest half-year, to April 30th, profits before tax increased 4%. Gareth Davies, chief executive of Wynnstay, said; "The Group is well-placed financially and operationally to navigate the ongoing coronavirus crisis. While we expect the remainder of the year to remain challenging, our confidence in the long-term prospects for Wynnstay remains undiminished."

Share price 335p
2020 high 347p
2020 low 203p
Five year high (2017) 660p
All-time high (2014) 679p
Change last 12 months 20%
Change last 5 years -39%
Change since 2004 65%
Market cap £67m
Yield 4.18
P/E 11
Revenue growth since 2015 30.2%
Pre-tax profits growth -8.4%
Total assets/total liabilities 2.4%
Current assets/total liabilities 1.7%
Current assets/current liabilities 1.8%
net assets £95.0m

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

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Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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