Surging UK demand spurs €200m expansion at C&C

C&C is planning a €200 million expansion at Clonmel, Co Tipperary, to cater for the increasing popularity of its Magners cider in Britain.

The investment, which should expand the Clonmel workforce by 150 to 750, is scheduled to be completed within 18 months.

The news comes less than two weeks after C&C said sales volumes of Magners, the trading name for Bulmers outside the Republic, were up almost fourfold over the first half of the year. Industry data shows the product is now on sale in more than 70 per cent of pubs in Britain.

Shareholders were told yesterday that the €200 million spend would reduce the group's free cashflow by between 30 and 40 per cent both this year and next.

This suggests a reduction of about €85 million in earnings before interest, tax, depreciation and amortisation in the current year, with a further €100 million shortfall probable in 2008 based on consensus estimates.

The firm moved to reassure the market about its ability to pay dividends, however, confirming that its "progressive" payout policy would remain in place.

The investment will allow C&C to double its cider production capacity to 500 million litres per year.

This will involve the development of more facilities for apple pressing, fermentation, filtration and the other processes that go into producing cider.

The largest portion of the spend will go on the addition of two new high-speed bottling lines. This follows a €65 million outlay on another new bottling facility last year, with C&C since having experienced some constraints in supplying the British off-sales trade with Magners.

Under the latest expansion, the new bottling lines should be in place in time for summer next year. Much of the remainder of the new investment should be in place by October 2007.

Brendan McGuinness, managing director of C&C's cider division, said the growth should cater for the firm's future as well as immediate needs for cider production. The company makes all of its cider in Clonmel and has no plans to change this strategy, Mr McGuinness added.

"It makes logical sense, given we're on 250 acres here - we can expand on an incremental basis."

Shares in C&C closed 10 cent higher at €10.55 last night. The stock has charmed the market for much of the year, having almost doubled in value since the start of January.