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Stabilising milk prices could buoy results in year ahead

Upwards pressure on dairy prices mean investors should keep a close eye on agricultural supplier NWF (NWF:AIM).

NWF, feedstock provider to one-sixth of the UK’s dairy herd, should benefit if early signs of improvement in the livestock market start to feed through to improved profitability for its customers.

Milk prices increased month-on-month in July and August to 21.3p a litre, according to figures published by government department Defra. Increases are on the back of a tough couple of years which saw farm gate prices fall almost a third.

NWF reported tough industry conditions in a trading statement on 29 September. Animal feed represents around 30% of revenue and 25% of profit at the Nantwich, Cheshire-headquartered business.

NWF also operates fuel and food distribution businesses.

Stabilising milk prices are still not enough to push the dairy farming industry as a whole into profit, according to research by farm accountant Old Mill.

A Farmers Guardian report quotes research from Old Mill showing losses of around 3p per litre on average, though including other income including calf and cattle sales profit was around 1.1p a litre.

Earnings per share (EPS) in the year to 31 May 2017 are estimated by Panmure Gordon analyst Adrian Kearsey at 12.1p, down 11% from 13.6p reported in the 12 months prior.

NWF’s shares trade at 156p. (JC)

Stabilising milk prices are a positive sign – keep an eye out for NWF’s next trading statement scheduled for some time in December.

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