C&C profits slip 41% in year of poor sales and expansion

PROFITS FELL by 41 per cent and sales were down by 8.1 per cent at CC last year after an expansion in cider brewing capacity in Clonmel and weaker cider sales left the company struggling.

Cider sales, which just two years ago fuelled CC's expansion into Britain and further afield, were down 8.2 per cent to €470.5 million. Sales volume declined 11 per cent while an operating margin of 22.8 per cent was down 11.9 percentage points from a year ago.

In Britain, where CC's Bulmers cider is sold under the Magners brand, the on-premises long alcohol drinks market declined 6.7 per cent annually, while Magners's market share declined from 1.7 per cent to 1.6 per cent.

Overall revenues at the drinks group fell 8.1 per cent to €679 million in the year to the end of February, while pretaxprofits fell by 41 per cent to €103.9 million.

Earnings per share were 32.2 cent when stripped of exceptional items, a decline of 41.4 per cent. CC is proposing to pay a final dividend for the year of 15 cent a share, which brings the total dividend up to 27 cent - unchanged from last year.

Finance director Brendan Dwan said CC decided to maintain the dividend payment as it has completed its capital investment programme.

During the year, CC bought back 5.4 per cent of its shares at a cost of €139.9 million.

Given the group's relatively low debt, Mr Dwan said further buy-backs "are on the agenda" but had to be balanced against the high dividend payment and the poor condition of the debt markets.

Performance was better last year in the firm's spirits and liquors division which sells Tullamore Dew whiskey. Revenues were up 12.3 per cent to €87.5 million, although operating profit declined.

Operating margin was down from 21.4 per cent in 2007 to 18.1 per cent last year. This reflected an increased investment in marketing and higher input costs, particularly a rise in the price of cream used in the production of Carolans cream liquor.

CC will have to buy 30-40 per cent fewer apples this year due to the large stock of fresh apple juice it has in storage in Clonmel.

Although CC chief executive Maurice Pratt said that trading in the year to date had been "soft", particularly in the Irish market, he expected the group to return to growth in the second quarter.

"In 2008/2009 we expect to stabilise the group's financial and market performance and to deliver growth through the benefits of a streamlined organisation, cost reduction programme and a series of marketing initiatives."

CC shares closed in Dublin at €4.87, a gain of more than 3 per cent as investors took comfort from the firm's guidance.

Last year's results included a €137.4 million net profit on the disposal of CC's soft drinks business to Britvic.