C&C's cider sales drive up shares by 12%

Drinks group C&C said first-half revenue jumped at least 25 per cent after the company's Magners cider brand benefited in the UK from warm summer weather, a change in British drinking habits, and the introduction of the beverage to more pubs.

Shares of C&C responded to the news by surging €1.03, or 12 per cent, to €9.75.

The stock is this year's stock-market darling, having risen 77 per cent since the start of January.

As a result of Magners' popularity in Britain, C&C's operating margin for the six months ended August 31st widened by about four percentage points, according to a trading statement the company issued yesterday. The margin excludes one-time items and amortisation, as well as the investment C&C is ploughing into marketing.

"This was the really big surprise in the statement," analysts at Davy Stockbrokers said.

Turnover at C&C's cider division rose about 75 per cent after volumes of Magners rose almost fourfold and volumes of Bulmers, the company's Irish cider brand, outperformed a flat domestic market to climb over 7 per cent. The company predicted Magners' growth will be sustained in the second half of the financial year. C&C's fortunes contrast with those of Diageo, which reported on Thursday that volumes of its iconic Guinness stout dropped 8 per cent in its home country in the year to June, the sixth straight year of declines.

Diageo said rising demand for cider and wine had eroded the beer market, a pattern that also has emerged in the UK. More than 1,000 jobs were lost in the UK brewing industry in the 12 months through March, according to the British Beer & Pub Association.

However, C&C is rolling out Magners in 20 major urban areas in the UK, including Manchester and Liverpool, in a bid to double the brand's market share to 1 per cent.

Fifty per cent of UK pubs already sell Magners and C&C expects the brand to be available nationwide by next year.

Magners was first sold in Northern Ireland, followed by launches in Scotland and central London.

The rollout is being supported by a €30 million advertising programme, the bulk of was spent in the fiscal first half.

Magners' success has prompted rival cider manufacturers in Britain to imitate the brand's pour-over-a-glass-of-ice approach, which is attracting younger as well as female drinkers.

Because of demand for Magners in the UK, C&C is experiencing capacity constraints, the company said yesterday. As a result, the drinks maker plans to bring forward the next phase of its cider expansion plan with a view to having increased capacity in operation before next summer. A new bottling facility came on stream in June.

Volume growth at C&C's international spirits and liqueur business amounted to 20 per cent in the first half, led by a strong performance for Tullamore Dew.

However, sales at the soft drinks and snacks division, which includes Ballygowan and Club Orange, dropped about 3 per cent

C&C is disposing of its snacks business, having agreed earlier in the summer to sell Tayto to Largo Foods, which currently manufactures the crisps under contract, for €62.3 million The sale is expected to be completed before the end of 2006.

C&C had been struggling to boost profits at Tayto over recent years, despite an attempt to revamp the product with a new healthy image, amid intense competition from UK brand Walkers.

The company is scheduled to report full earnings for the first half on October 12th.