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Tennent's boosts revenues for C&C

C&C Group has signalled that Tennent's remains the star performer in its portfolio, as its cider brands continue to feel the effects of a damp summer season and tough competition from rivals.

ON A ROLL: Tennent's revenue increased 7.3% in the nine months to the end of November. Picture: Martin Shields
ON A ROLL: Tennent's revenue increased 7.3% in the nine months to the end of November. Picture: Martin Shields

Volumes of Tennent's products – made at the Wellpark Brewery in Glasgow – dipped 5.5% in the UK during the nine months to the end of November 2012 but revenue has held up and was 7.3% ahead of the previous year. Third-quarter volumes were down 3.6% with revenue 7.5% up.

The strong revenue performance is due to higher average prices, more premium products and formerly loss-making contracts being wound down or renegotiated.

Tennent's trading over Christmas was described as resilient and C&C said it was pleased with how the Caledonian Best brand was doing in Scotland.

The performance of Tennent's was in contrast to C&C's UK cider operations where overall volumes of Magners – recently announced as the new shirt sponsor of Celtic – and Gaymers were down 16.8% in the nine month period with net revenue declining 20.8%.

Analysts from Canaccord Genuity said: "[Tennent's UK] business remains a core driver with management, having executed improved pricing as it re-aligns its routes to market."

In Ireland volumes of Tennent's are running 22% ahead, although C&C said this was from a relatively small base. Overall beer volumes in the country showed a 15.6% increase in the nine months.

Cider volumes fell 4.4% in the same period, although they rebounded to show 0.4% growth in the three months to the end of November.

Overall net revenue in Ireland across the nine months was down 10%, with combined beer and cider volume showing a 1.6% fall across the same period.

Volumes posted a 1.8% increase in the three months to the end of November with revenue down by 3.5%.

International growth of Tennent's was said to be strong, with Italy a popular market.

A recent note from analysts at Berenberg suggested 60% of Tennent's export volumes went to Italy, followed by Ukraine at 17%, Canada at 13%, the United States at 4% and Spain at 3%, with the remaining amount going to unspecified countries.

Dublin-based C&C declined to break out full export figures for individual brands but said international volumes – excluding the acquisition of the Vermont Hard Cider Company (VHCC) – in the nine months were 45% ahead with revenue up 37.4% on a constancy currency basis.

Magners volume was 16% up in North America but had suffered distribution problems in Australia.

VHCC, bought for £189 million prior to Christmas, is expected to deliver €1.5m (£1.2m) of earnings before interest and tax between the end of December and February.

C&C said it expected export volumes to continue to grow in the final quarter of its financial year, particularly as customers began to order additional stock ahead of St Patrick's Day celebrations.

However, the tricky conditions in the domestic markets caused C&C – headed by chief executive Stephen Glancey – to re-iterate that operating profits would be at the lower end of the €112m to €118m range the market expects.

Canaccord retained its sell rating on the C&C stock and added: "The decision to internationalise the business is sound, but we question the cost of doing this.

"We need to see an improvement in [Ireland and the] UK before we can turn positive."

C&C continues to back government plans to introduce minimum alcohol pricing.

Since buying Tennent's in 2009 C&C has invested in a training academy and bottling line in Glasgow.

Shares in C&C ended the day down €0.05 at €4.5.

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