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AG Barr on track to achieve profit target

THE chief executive of AG Barr has declared the Irn-Bru maker's future growth does not hinge on making acquisitions after the company said it was on-track to deliver a market-beating 5.5% rise in fourth quarter sales.

ADDITION: The new £34m plant in Milton Keynes works alongside this one in Cumbernauld. Picture: Andrew Milligan

Roger White said the Cumbernauld-based supplier is anticipating sales will come in "nicely ahead of the market" for its final quarter, although sector data for the period has still to be made available.

The update puts AG Barr on course for a 6.1% increase in revenue to £252 million when it reports results for the year to January 26. It is due to present the results on March 25.

Mr White said: "Trading continues to be quite tough.

"Consumers are still looking for value. We have seen how the retailers have been clearly been mixed in their trading results, so we're very happy with our performance."

AG Barr's progress suggests the firm is suffering no ill-effects from its attempted takeover of bigger rival Britvic, which was formally aborted in July.

Mr White refused to rule out making further moves to acquire, but insisted it was not essential.

He said: "Our job is to make sure we give our consumers and our customers what they want and from a practical point of view to make sure our balance sheet and our capacity for growth is in good order.

"If opportunities come along, whatever they may be, then we will look at them on an individual basis.

"Our balance sheet is very strong, the performance of the business I think is pretty good and we are capable of more growth whether it is organic or through acquisition."

AG Barr said its fourth quarter had been satisfying given that it was set against "tough prior year comparatives", with the company having hit double-digit percentage growth in the second half of 2012.

It said its core brands responded positively to investment, including the return of the Irn-Bru "Snowman" advert over Christmas, in spite of growing "price-driven competition" in its major routes to market.

But the firm noted that planned increases in marketing and promotional investment "have capped further margin progress in the final quarter".

Mr White highlighted the impact made by the firm's £34m manufacturing plant at Milton Keynes, which has significantly boosted its canning capacity.

He hinted that further investment in the site was likely to be forthcoming and said: "I think we were clear when we first announced the site that we were putting [in place] a site that was capable of significant further growth.

"That would remain the case. Implicit in that is that we will invest more money in the that site to help support out growth in the future.

"But we continue to invest in all our sites in terms of ongoing support [and] development of the lines.

"Milton Keynes has more space and more capacity for growth than most."

Analysts welcomed the update, with Canaccord Genuity maintaining its buy position as it lifted its share target price to 650p from 630p.

Canaccord's Wayne Brown cited the benefits of the Milton Keynes plant and a "more benign cost environment", as well as "favourable growth in carbonates and water".

Mr Brown said: "This is yet another strong trading update, which highlights market share gains across a soft drinks market that has a long-term average of 2% to 3% growth per annum.

"AG Barr is only at the start of seeing benefits from its new production facility in Milton Keynes.

"We expect this to be one of the key drivers."

Panmure Gordon kept its hold recommendation as it confirmed AG Barr's projected full-year revenue had exceeded its expectation. It left its profit forecast unchanged at £37.5m, while noting caution over challenging trading conditions.

Lifting its target price to 615p from 560p, the analyst also noted that AG Barr had reinvested margin improvements in its core brands.

Panmure, which updated its revenue forecast from £248m to £252m, said shares in AG Barr have risen by 8% in the year to date, outperforming the market by 6.5% as well as its soft drink peers.

Shares closed up 4.5p at 614p.

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