AG Barr has suffered a fall in sales in the latest four months amid fierce competition in the soft drinks market but said it is on course to achieve growth in profits in line with expectations.
The Cumbernauld-based Irn Bru maker yesterday announced that revenue fell by 0.6 per cent in the 18 weeks to November, compared with the same period last year. The fall was stated after adjusting for the effect of the early ending of the company's distribution contract for Orangina by the recently formed Lucozade Ribena Suntory Group.
In an update on trading in the 18 week period AG Barr said revenue had fallen as anticipated following a strong first half, as soft drink makers grappled with the effects of a slowdown in the market.
The company noted the fall was partly driven by "a very competitive, price driven trading environment in a soft drinks market which was in revenue decline".
The company, which completed lower promotional activity, also cited destocking by wholesalers.
However AG Barr, noted the recent fall in sales followed a very strong first half, in which it grew turnover by 5.4 per cent annually.
When AG Barr announced results for the six months to 27 July, in September, its chief executive Roger White highlighted the boost the company enjoyed as a result of the Glasgow Commonwealth Games.
The company said then the games had provided a lift for the Irn-Bru, Rubicon, Barr and Strathmore brands.
AG Barr provided all of the venues and athletes with brands on an exclusive basis. It said Strathmore was also highly visible on the field of play across all of the Games venues.
Mr White said the company had done a good job of strengthening its emotional connection with consumers in its core market through its involvement with the games. These ran from 23 July to 3 August, straddling the half year end.
AG Barr said yesterday that the soft drinks market remains "dynamic and competitive" ahead of the key festive trading period.
However, the company appears confident it is more than holding its own.
A.G. Barr said it has increased revenues by 3.5 per cent in the year to date, compared with 0.4 per cent growth in the market as estimated by the Nielsen consultancy.
The company??s house broker Investec noted that Britvic recently reported a 2.1 per cent fall in fourth quarter revenues for Great Britain, in an update on trading in the 52 weeks to 28 September issued in October.
In Britvic's annual results announcement last month the company's chief executive Simon Litherland said the current year had begun slowly, reflecting the increasingly challenging trading conditions.
Investec noted price competition has increased in colas in particular.
A.G. Barr said it has a strong trading plan to drive growth despite tough year on year comparatives and trading conditions.
It said: "Assuming current market conditions continue, we remain confident of delivering our full year performance expectations and look forward to further growth in the next financial year."
The company noted it recently agreed a 10 year deal with America's Dr Pepper Snapple group to distribute fruit juices and iced teas across the UK and Ireland as well as in Germany and Norway from January 2015.
AG Barr said it has made good progress with work to add capacity and boost efficiency at its site in Milton Keynes. The company expects to complete the previously announced closure of its site in Tredegar in Wales early in the next financial year.
The company's telesales and back office functions have been concentrated in a recently refurbished office block adjacent to its North Lanarkshire HQ. This brought some jobs from around the UK back into AG Barr's Scottish operation.
In a note on AG Barr, Investec told clients: "The group has a strong trading plan as it enters the important festive trading period and remains confident of meeting market expectations. We make no changes to our forecasts or target price."
Investec forecasts AG Barr will increase underlying pre-tax profits to £41.5m in the year to 31 January, from £38.1m last time. It expects revenues to increase by 4.7 per cent, to £266.1m from £254.1m.
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