C&C forecasts rise in profits

Drinks group C&C expects to increase operating profits by 15-25 per cent in the next 12 months, following 225 per cent volume growth in sales of its international cider brand, Magners, in its last financial year.

In a trading statement issued yesterday, C&C said it expected turnover for the year to the end of February 2007 to have grown by approximately 25 per cent, driven in large part by the success of Magners in Britain, which was rolled out in 2005.

Sales of Magners were boosted by good summer weather, but the expansion was constrained as C&C failed to keep up with demand in the second half of the year due to inadequate manufacturing capacity at critical periods.

C&C said it planned to increase capacity in order to capitalise fully on opportunities for the Magners brand in all trade channels in Britain.

The drinks group said it intended to significantly increase the overall level of marketing investment in its 2007-2008 financial year. As a result, it anticipates that operating profit growth from its continuing operations to be in the 15-25 per cent range, which was lower than had been expected by analysts.

Both Goodbody Stockbrokers and Davy Stockbrokers said earnings per share (eps) expectations should be lowered as a result of the outlook statement, which Davy food sector analyst John O'Reilly said was "bound to disappoint".

But Mr O'Reilly added that Magners was still a strong growth story, and NCB, which had been less bullish on the company, said the update should provide "solid comfort" to the market. C&C's cider plans remained on track. It left its operating profits and eps forecasts unchanged.

C&C chief executive Maurice Pratt said the company's main focus for the next 12 months would be to enhance the market position of Magners in Britain.

The group will also market test Magners in two other European markets, Mr Pratt said.

Overall turnover growth in the cider division is expected to be in excess of 80 per cent. Bulmers, its Irish cider brand, is also continuing to out-perform in the long-alcoholic drinks market, and volumes are expected to have grown 5 per cent over the last 12 months.

Meanwhile, shipment volumes in C&C's spirits and liqueurs division are expected to show growth of 11 per cent, the company said.

Turnover in the soft drinks division is expected to be down around 1 per cent, while the distribution division is expected to show a significant decline in profits as a result of the loss of the former Allied Domecq brands at the start of 2006.

Some 40 million C&C shares traded on the Dublin and London markets yesterday, 22 million of them in Dublin, and the stock finished the day down almost 10 per cent at €10.50.

The company's preliminary full-year results are due in May.