AG Barr says its profits are expected to drop

AG Barr says its profits are expected to drop

Soft drinks group AG Barr has predicted a drop in profits for the first half of the year blaming rising costs and bad weather.

In a trading update today (27 July), the Irn Bru producer said that record rainfall in the UK hit sales in March and April and is expected to affect June and July results. Increased costs of goods, higher brand investment and changes to the sales mix also cut margins, the company said. 

“As a result we expect profits in the first six months to be slightly below the prior year,” it said.

However, the company predicted sales of GBP130m (US$203.4), a rise of more than 4.5% year-on-year.

In May, Barr announced that sales rose slightly in the 14 weeks to 5 May despite a wet April and low consumer confidence causing a “challenging” market. And in March the company warned that the soaring price of sugar will force up its costs by around 4% to 5% in the year ahead

However, today Barr was upbeat for the year ahead, despite difficult operating conditions. 

“We have maintained our strategy of investing in brand equity and extending distribution,” the company said. “Our core brands continue to respond well to this consistent long term approach.”

The Glasgow-based firm said it has moved ahead with plans to build a new warehouse and production facility in Milton Keynes. 

It has obtained detailed planning approval and a credit facility with HSBC to support the development. Building is expected to start in the third quarter of next year.

AG Barr will announce its H1 results on 24 September. 

To find out analysts' reaction to the company's performance, click here

For today's full statement, click here