AG Barr grows sales despite weather woes

By Anne Bruce

- Last updated on GMT

Related tags: Ag barr, Soft drink, Stock market

Irn-Bru helped get AG Barr through the poor weather
Irn-Bru helped get AG Barr through the poor weather
Analysts remained sympathetic to Irn-Bru maker AG Barr after it reported that profits had been buffeted by factors including this year’s “unprecedented weather”.

The Scottish company’s share price slipped by just under 3% to 418.1p on the back of its latest trading update, covering the half year to July 30.

AG Barr, which also makes Rubicon, said it expects to deliver 4.5% sales growth to around £130M in the first half.

However, margins in the first half of the year have been impacted by raw material cost rises and increased marketing costs.

Margin shortfalls

Profits in the first six months were set to be slightly below the prior year. Although they were expected to improve in the second half, “that is unlikely to offset the margin shortfalls of the first half”​, it said.

AG Barr said it was pressing ahead with an investment programme. It now has detailed planning approval for a £41M development of a production and warehouse facility at Magna Park in Milton Keynes, with credit secured through HSBC.

The site, which is due to be operational in the third quarter of 2013, will initially support a canning facility and then polyethylene terephthalate capacity.

Analyst Damian McNeela of Panmure Gordon said Barr had delivered a “good performance against the current UK market backdrop of intense promotional activity and weak weather trends”​.

Strong growth

He said: “The poor weather in the UK has adversely affected channel mix, as fewer consumers have been purchasing soft drinks through the higher margin impulse channel. Additionally, the company has experienced strong growth in its Rockstar energy drink in line with the broader market but, as it is a licensed brand, it generates a lower profit contribution.”

He maintained a 'Hold’ recommendation on the stock, saying AG Barr had outperformed the FTSE All Share index by around 5% in the year to date, with “consistently strong financial performance, strong balance sheet and near-term growth expectations”​.

For the 26 weeks to June 23 2012, Nielsen reported total soft drinks market volumes down by 1% while value was 2% ahead. Within this overall performance, carbonates volume was flat with stills declining by 3%. The carbonates category was once more driven strongly by the energy segment, which grew in value by 11% over the time frame.

AG Barr will announce its interim financial results for the six months to July 28 on September 24 2012.

Related topics: Drinks

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