C&C first-half profit drop reflects post-Brexit sterling fall

C&C has reported a decline in operating profit for the first half of 2016 against a backdrop of "volatility in consumer behaviour" shaped by economic uncertainty in the aftermath of the Brexit vote.

The drinks company said it expects the second half of the year to benefit from increased investment in marketing during the first six months as well as cost reduction plans.

Key brands including Bulmers, Tenants and Magners all saw growth, according to its trading report published on Thursday. It saw an operating profit decline of 7.9 per cent to €55.1 million with net revenues of €307 million.

Operating profits stabilised in Ireland following what the company described as a challenging year.

This related specifically to a fall in sterling, impacting adversely on revenues and operating profits to the sums of €24.4 million and €2.8 million respectively.

"In the first half, we have seen some variability in consumer demand and are cautious on forward consumer reaction to political and economic conditions in our core markets," said group chief executive Stephen Glancey.

"However, we have a business that is capable of weathering these challenges and our confidence in the medium-to-long term outlook is based on the strength of our key brands, our business model and leading positions in Ireland and Scotland – where fundamentals remain strong."

Export business

Mr Glancey also highlighted C&C’s growing export business as well as a broadening portfolio of premium and speciality beers and ciders.

In the first half of 2016, Bulmers sales grew by 6 per cent, Tennent’s by 2 per cent and Magners by 11 per cent. There has been continued growth in export with Tennent’s volumes performing particularly well.

It said there was volatility in consumer behaviour across the sector due to “heightened economic uncertainty” following the Brexit vote and the related devaluation in sterling.

The company has also highlighted its portfolio of premium and craft beers and ciders such as Heverlee, Menabrea and Chaplin & Cork’s. Volumes here grew by 24 per cent in the first half.

“Our consolidation and efficiency programme is going to plan with minimum disruption to the broader business,” said Mr Glancey.

"As part of the operational consolidation, we invested €9 million in a new PET bottling line at Clonmel in the first half and sold our bottling operations in Shepton for €9 million. Last week we also completed the disposal of our cidery in Shepton Mallet.

“We remain on track to deliver the €15 million of targeted cost savings and efficiency gains.”

There was an interim dividend increase of 5 per cent to 4.96 cent per share.