Strength in fuels and food offsets feeds weakness for NWF

Agricultural fuel, food and feed distributor NWF Group updated the market on its first half on Tuesday, reporting that trading in the latter part of the period was strong, with underlying trends in its markets consistent through the half-year.

The AIM-traded firm said that as a result, it now expected to report underlying results for the first half “significantly ahead” of last year, as it saw a return on its recent investments.

Its board said the strong first half performance provided a “solid platform” for the business entering the “seasonally important” third quarter, and thus the directors remained confident of delivering on full-year expectations.

In fuels, the company described a strong performance ahead of expectations, as well as the prior year comparative period.

The division saw a short-term benefit from increased demand related to the fuel shortages in the autumn, with the group maintaining continuity of supply at all depots across the country.

NWF said it experienced no supply shortages during the period, and had a “full complement of drivers” to meet demand.

Its board was continuing to appraise earnings-enhancing acquisition opportunities for the division, in line with the strategy of consolidating a fragmented UK fuels market.

In the food division, NWF said it performed “well ahead” of the prior year, as the business benefited from its enlarged capacity, experiencing strong demand, as well as enhanced efficiency with stock in optimum locations.

The company said there was still some near-term volatility in market conditions, as customers experienced difficulties in manufacturing and importing ambient groceries, with supermarkets increasing stock levels as a result of concerns over driver availability and supply chain issues.

Finally, in feeds, the company reported a “disappointing” performance, behind the prior year as a result of lower volumes, significant commodity price and cost inflation, and the challenges of passing that through to customers in the short term.

In the latter part of the first half, price increases were implemented to cover the inflationary pressures, and there was “an element” of volume recovery, although it was still lower than the prior year.

Net debt at the end of the first half was “materially lower” than last year, the board said, as a result of the stronger trading result, together with ongoing disciplined cash management across the group.

That provided the business with “significant capacity” to support its investment-driven growth strategy.

On the governance front, NWF said that in line with its governance policy, current non-executive chair Philip Acton would step down at the time of the 2022 annual general meeting next September, having completed nine years of service with the company.

David Downie, currently senior independent non-executive director, would be appointed as chair at that time.

The process to recruit an additional non-executive director would begin “shortly”, with an appointment to be made ahead of the 2022 meeting.

“We have delivered a very strong first half performance, despite volatile market demand and significant inflationary pressures,” said chief executive officer Richard Whiting.

“The group has been able to retain labour and drivers, ensuring we have continued to service our customers' needs.”

Whiting said both fuels and food delivered “significant” year-on-year growth in the first half, more-than-offsetting a weaker feeds result, with the firm entering its seasonally busier second half with good momentum.

“We continue to focus on the long-term growth of the group, with a clear strategy which is supported by a very strong financial position.”

At 1239 GMT, shares in NWF Group were up 0.95% at 212p.