C&C predicts earnings growth despite tough market
Unseasonably cold weather hit volumes in Ireland in first quarter
Cold weather in March and April impacted on cider volumes in the Irish market. Photograph: Bryan O’Brien /The Irish Times
Drinks group C&C said operating profit will be in the range of €125 million to €132 million for the financial year, despite ongoing difficult trading conditions.
The figures, which are similar to recent predictions by analysts at Goodbody and Davy, represent earnings growth of between 10 per cent and 16 per cent.
Shares in C&C closed down seven per cent to €3.85.
Trading conditions in C&C’s core Irish and UK markets remained difficult in the first quarter of the financial year, with the expectation that the trend would continue for the remainder of the 12-month period.
Volumes in Ireland suffered as unseasonably cold weather hit March and April, with a relative improvement in May. But in the three months to the end of May, volumes in the Irish market fell by 11.5 per cent, with revenues declining by 13 per cent.
Cider volumes were hit hardest, falling by 13 per cent in the quarter, with beer volumes down 1.7 per cent.
The first quarter of the financial year saw cider and beer volumes decline in Ireland, as off-trade activity shrank. In the UK market, Magners and Gaymers both saw volumes fall, with more than 85 per cent of the loss driven by the competitive off-trade channel.
Speaking at its annual general meeting in the Shelbourne Hotel in Dublin today C&C chairman Brian Stewart described the group’s financial performance as “satisfactory” given the challenging conditions.
“Despite poor summer trading in Ireland and the UK and increased competition in the British cider category and ongoing economic weakness we still delivered results,” he said.
“During the 2013 financial year the group made significant progress towards building a sustainable international multi-beverage business,” he said, highlighting the recent acquisitions of the Vermont Hard Cider Company and the Gleeson Group.
“Our balance sheet remains strong despite the significant acquisition spend this year and we have the strength and free cash-flow characteristics to sustain both a progressive dividend stream and meet our growth objectives and opportunities as they arrive.”
Chief executive Stephen Glancey said there had been a fourfold increase in international volumes from 2009, which he attributed to both acquisitions and organic growth. During its last fiscal year the group’s international business unit enjoyed volume growth of 55.2 per cent. cider brand Gaymers showed steady growth in overseas markets during the first quarter of the new financial year, with growth in Woodchuck described as modest and Tennent’s, Magners and Hornsby’s volumes falling over the three months.
Dismissing concerns from shareholders that the group might be expanding too quickly Mr Glancey said that while the group was intent on remaining a cider-led business with a focus on its core markets in Ireland and UK, it was important to diversify in order to lessen risk.
“We have been fairly cautious in terms of the deals we have done and our US acquisitions in particular have been expensive. But the prices paid have not been over the top and the US market is expanding significantly,” he said.