Nichols posts UK sales growth as Yemen conflict hits profits
Sales of Vimto had significantly outperformed the UK’s market growth of 2.3%, claimed the firm.
The beverage firm expected group sales to continue the “strong trend” reported in its half year results, which saw the company’s revenues grow 12.4% to £63.5M.
Nichols added: “As previously reported, this strong sales performance helps mitigate the margin impact from the increased input costs affecting the industry.”
The company’s international sales were expected to be up, with revenues in Africa forecast to be up 20% compared with last year.
Escalation of hostilities in Yemen
But the escalation of hostilities in Yemen was expected to damage profits, after a supply route to Nichols’ Yemeni customer being blockaded.
“At this time we are unable to send any further Vimto concentrate shipments that were planned for December 2017,” said Nichols.
“As a consequence, management currently expects adjusted group profit before tax [PBT] for the year ending December 31 2017 to be in line with the prior year.”
Commenting on the results, Sahill Shan, partner at business analyst N+1 Singer, said the trading update reflected positively on Nichols’ management.
However, Shan added: “Recent political developments in Yemen, which are totally outside of management’s control, have had an adverse affect on Middle East sales.
‘Regional uncertainty going into next year’
“Consequently the company is guiding to a flat 2017 PBT outcome and given regional uncertainty going into next year, modest profit growth in 2018.”
As a result, N+1 have lowered its three-year PBT forecasts by 6%–12% for the company.
Shan continued: “Whilst it is disappointing to be downgrading, we strongly feel this should not overshadow Nichols’ fundamental attractions around geographical diversity, a progressive dividend per share policy and a strong balance sheet.”
Nichols expected to release its preliminary results on March 1 2018.
Meanwhile, earlier this month, Boparan Holdings reported operating profit down by 57.6% to £8.4M – after the temporary closure of its 2 Sisters’ West Bromwich poultry plant – in its first-quarter results.
