Carr’s Group’s Agriculture division serves farmers in the North of England, South Wales, the Welsh Borders and Scotland, the US, Germany, Canada and New Zealand. The Engineering division offers remote handling equipment and fabrications to the global nuclear and oil and gas industries.
Carr’s trading update for the first 19 weeks of FY21 notes that trading in Agriculture was ahead of management expectations because of strong sales of supplements. This was offset by a weaker than expected performance in the Engineering division caused by continued low crude oil prices. We note that net debt (excluding leases) was 24% lower year-on-year at the end of November, reflecting close inventory control and lower commodity prices. We leave our estimates broadly unchanged and reiterate our indicative valuation of 170p/share.
Cattle prices in the US have remained robust since the recovery noted towards the end of FY20, stimulating demand for feed blocks. Exports of both feed blocks and Animax supplements to the Republic of Ireland have increased following deployment of additional sales personnel there. Both these positive trends are likely to continue. Long-term engineering projects for the nuclear and defence sectors are progressing well. However, global oil prices remain relatively low, reducing investment by the oil and gas industry, which is having a negative impact on some of the UK manufacturing activity.