C&C to release trading update at agm

Drinks group C&C, which owns Bulmers cider and Tennent’s lager, is to release a trading update this Thursday, the day of its agm.

The trading update will cover the period since March 1st. The drinks distributor and manufacturer reported revenue growth of 10.3 per cent to €683.9 million for the year to the end of February.

However, operating profit at the company declined 9.2 per cent to €115 million in the 12 months to February 28th. The company attributed the decline in profitability to challenging trading environments in C&C Brands and in the US.

At the time, C&C reported a “strong performance” in both Ireland and Scotland, with operating profit growth of 1.5 per cent and 1.8 per cent respectively. It noted a strong portfolio performance with growth in new brands and it said that 2016 would see investment and support for Tennent’s and Bulmers brands.

Ahead of this week’s trading update, Davy Stockbrokers said the operating environment remains challenging for C&C across key markets. It said an increasingly competitive marketplace in Ireland was compounded by unseasonably cold weather in May. In Scotland, the market is still adjusting to the new drink-driving legislation, which is weighing on volume development. Ireland and Scotland account for 85 per cent of C&C’s profits.

Davy analyst Cathal Kenny said inclement weather in May and early June will have impacted volumes in Ireland.

“The phase of adjustment to new drink-driving legislation, which commenced on December 5th, 2014, is ongoing and will weigh on volume development for a number of months,” he added, referring to C&C’s business in Scotland.

He said current forecasts for Ireland and Scotland reflect a difficult revenue backdrop, adding that C&C is scaling up operational investment in most markets.

“FY 2015 was a difficult financial year for the group, which saw meaningful downward revisions to earnings forecasts. For FY 2016, Davy forecasts call for a flat EBIT outturn year-on-year at €115 million.”

However, he said forecast net revenue declines in core markets (Ireland -3.0 per cent, Scotland -3.5 per cent) are more than offset by currency translation due to the strength of sterling.

Earlier this year, C&C reported a sharp fall in profits in its small North American division, where operating profit fell to €1.5 million from €11 million as volumes fell 18 per cent, for the year to the end of February.

As a result the drinks group said it would write down €150 million from the value of its US business.