IRN-Bru manufacturer AG Barr has revealed its profits for the six months to July 28 are likely to be down slightly on its previous first half, even though it battled through wet weather to achieve a 4.5%-plus rise in sales value.
AG Barr, which is projecting first-half sales of about £130 million, cited figures from market researcher Nielsen showing total UK soft drinks market sales value in the 26 weeks to June 23 was up only 2% on the same period last year, with volumes down 1%.
However, Roger White, chief executive of AG Barr, was pleased with the performance of the business, which also makes Barr carbonated drinks, the Rubicon exotic juice-based range, and Rockstar energy drinks.
He said: "We are in quite an interesting market place at the minute in the sense we have had the wettest weather on record over a number of months. We have, from a sales point of view, traded extremely strongly through and in spite of that."
Emphasising that short-term, weather-related challenges would not crimp investment in the brands and in extending distribution, he added: "The message from us is we are not cutting back on what we think is the right thing for the medium and long-term health of the business."
AG Barr said profit margins in its first half to July were impacted by rises in costs, increased investment in its brands, and "adverse changes to our sales mix at brand, pack, and channel level".
Asked about the adverse impact of sales mix on profit margins, Mr White said impulse purchases of smaller, half-litre bottles of soft drinks had been lower because of the poor weather. This had been offset, he noted, by increased sales of larger bottles for the take-home market, particularly at big retailers at which there tended to be greater promotional activity.
The Nielsen figures show growth in the soft drinks market is being driven by the energy segment, in which sales value in the six months to June 23 was up 11% on the same period of last year. The volume of sales of carbonates was flat, comparing the six months to June 23 with the same period of 2011, with the still soft drinks category down by 3% on this basis.
Mr White noted AG Barr was represented in the fast-growing energy drinks sector by Rockstar, which tended to have lower profit margins because it was a franchise brand.
AG Barr made underlying pre-tax profits of £16.2m in the first half of its previous financial year to July 30, 2011, on sales of £124m.
Its house broker, Investec, yesterday trimmed its forecast of AG Barr's pre-tax profits for the current financial year to January 2013 to £34m, from £35.6m, in the wake of the company's trading update. If achieved, this would still represent an increase from the underlying pre-tax profit number of £33.6m for the year to January 2012.
Stockbroker Shore Capital cut its prediction of AG Barr's full-year, pre-tax profits from £36m to £34m. It described AG Barr's sales performance in the six months to July 28 as very credible.
AG Barr said that it anticipated profit margins would improve in its second half but added that this was "unlikely to offset the margin shortfalls of the first half".
The company employs about 940 people, with slightly more than half of this workforce in Scotland. It is investing about £41m in a new manufacturing site at Milton Keynes, at which production is due to start in the third quarter of 2013.
AG Barr achieved a year-on-year rise in its overall volume, as well as value, of sales in the six months to July 28 in spite of the weakness of the overall market.
Mr White said: "The business continues to grow in revenue and volume."
He also highlighted his expectation that the overall soft drinks market would have been hit further in late June and in July by record levels of rainfall.
He said: "If this is the case, AG Barr's performance relative to the market during the six months to July 28 will have been even stronger than suggested by the Nielsen figures for the period to June 23.
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