Carr's Group reports higher profits despite challenging year
Carr's Group has reported higher profits despite a challenging year that saw its business suffer from the impact of falling dairy prices, low oil and gas prices, and Storm Desmond floods.
The engineering and agricultural firm reported a 2.8% rise in pre-tax profits to £14.1 million in the 12 months to September 3, as it dodged a series of challenges, including those thrown up by floods across northern England at the turn of the year.
Chief executive Tim Davies said flooding not only impacted crucial logistics and transport by blocking roadways and bridges, but hit its main agricultural feed mill in Lancaster, and major customers including United Biscuits in Carlisle.
"That was the first challenge, which we successfully overcame, and there was no financial impact. The second one has generally been the farming economy, particularly dairy, which has been under severe pressure for 18 months."
Low milk prices have squeezed the income and spending power of Carr's Group dairy farm customers, subsequently hitting the company's margins.
Meanwhile, Carr's engineering unit - which services the energy sector - was impacted by subdued investment across the oil and gas sector amid floundering commodity prices.
Mr Davies explained that the company has been working to reduce its exposure to oil and gas, and shift it towards nuclear energy, which now comprises around 75% of the engineering business.
It comes as the company embarks on a strategic overhaul that saw it sell off its foods business to Whitworths for £24.9 million in cash, and later acquire German engineering firm Staber for around 7.85 million euros (£6.8 million).
Alongside engineering, the company will continue to focus on its agricultural unit, which delivered an 8.6% rise in operating profit to £10.3 million, driven by its US feedblock business.
When asked how the trade policies of President-elect Donald Trump might impact US sales, Mr Davies said it was too soon to tell.
While he was surprised by Mr Trump's rise to power, Mr Davies said: "Since he's been elected as the future president ... his tone seemed to be slightly more concessionary. It will depend, I suppose, a lot on who he gets alongside him, how his team is made up, but it's very difficult to say."
Mr Trump's anti-trade rhetoric has raised concerns over whether global exporters will struggle to access the US market.
Meanwhile, the impact that the Brexit vote has had on farmer confidence and the value of the pound - which has tumbled nearly 20% against the dollar and 15% against the euro since the referendum - has thrown up further challenges for Carr's.
"Brexit in relation to farming is obviously a concern. Since the election, the price of raw materials has gone up so we're passing the costs of those raw materials on to farmers in terms of feed price increases.
"But conversely they've also had reasonably significant benefit from the fact that imports have been expensive and they've been able to to export more effectively as well, particularly beef and sheep."
He added: "Going forward there are uncertainties around what happens to the CAP (the EU Common Agricultural Policy) and their payments, whether they will be retained by the British Government and how they will be paid out to farmers.
"So there is a lot of uncertainty and it's very early days at this time."