Cider maker C&C said yesterday that its turnover in the six months to the end of August will be flat, while its operating margin is expected to decline by some 9 per cent when compared with the same period in 2006.
The Maurice Pratt-led group said this poor performance reflected the combination of "weak demand" and "substantially increased marketing and manufacturing costs" within its cider division, which produces Bulmers for the Irish market and Magners in Britain.
This news was in line with previous guidance released to the market on July 31st when the company issued its second profit warning in quick succession.
C&C's trading statement said turnover in the cider division would be about 1 per cent ahead of the same period in 2006, although sales volumes would show a 2 per cent decline.
"The volume decline reflects the extremely poor weather in Ireland and Britain and the impact of competition in Britain," the firm said. Sales of Bulmers are expected to decline by 6 per cent while shipments of Magners to Britain would be 2 per cent higher than last year.
Its spirits and liqueur shipments are expected to rise by 5 per cent on the same period in 2006, boosted by double-digit growth in its Tullamore Dew Irish whiskey brand.
C&C's €249 million sale of its soft drinks business, which included Club fizzy drinks and Ballygowan water, to Britvic was completed on August 29th.
The Irish drinks company said the operating profit accruing to the group from these assets in the six-month period was some €6 million. This was down on the same period of 2006, with the decline blamed on "very poor" summer weather.
C&C said it would resume its share-buyback programme following the publication of its interim results on October 10th, using the proceeds from the sale of its soft drinks division. This programme was suspended on July 31st.
C&C restated its results for the six months to the end of August 2006 to reflect the disposal of its soft drinks arm and the loss of some distribution contracts. As a result, its revenue for the period has been restated from €532.1 million down to €376.6 million. Its operating profit has gone from €113.5 million to €100.7 million.
In spite of the negative tone of the trading statement, C&C's share price rose by 1.1 per cent in Dublin to €5.39. In a note to clients, London-based analysts at global investment bank Citigroup retained its hold recommendation on C&C, but reduced its price target from €6.50 to €6.00 in light of the trading update.
