Brexit threatens C&C Group turnaround efforts - Q1 update
C&C Group says Magners is taking market share
C&C Group has warned investors Brexit could wipe out efforts to get the Magners owner back on track.
In a Q1 trading statement today, the company said currency fluctuations caused by the UK's decision to leave the EU threatens to undo earnings benefits from recent cost-cutting savings and an uptick in volumes. It said the referendum result "brings with it uncertainty, volatility and a lack of visibility".
The UK last month voted to exit the European Union, sparkling a plunge in the value of the Pound and uncertainty in global markets.
Today, C&C Group admitted that because it takes half of its profits in Sterling and reports in Euros it is exposed to the effects of a devalued Pound.
"At current levels, if sustained, currency movements have the potential to undo the earnings benefit from both cost reduction activity and the steady progress made in trading year-to-date," it said.
C&C's warning will not surprise financial markets. Last week, Société Générale analyst Andrew Holland said the company will be a Brexit loser because half of its business comes from the UK.
The referendum vote comes at a difficult time for C&C Group, which saw sales and underlying profits fall in its most recent full-year results. Meanwhile, in January it said it was to close its cider packaging and production facilities in England and consolidate production into its manufacturing site in Tipperary, Ireland.
Last week, the company confirmed that it was reducing its Magners fruit cider production and focussing on apple and pear because of "flavour fatigue" from consumers.
However, the brand appears to be returning to health in the UK. In today's Q1 results, Magners in the UK was up 24% in volumes over last year. C&C said that latest retail data in the off-premise shows the brand's moving annual total (MAT) to be growing by 5% in volumes in a cider category that is down 2%.
Elsewhere, C&C Group said that exports are on track to deliver more than 20% volumes growth for the year through a combination of organic growth and the impact of new distribution deals. The company has signed a number of distribution deals overseas this year including with Pabst Brewing Co in the US and most recently for Magners in Taiwan.
Bulmers cider grew volumes by 9% in Q1 as "decent weather in March and May gave the cider category an early boost", C&C Group said. The brand has been under pressure in Ireland from Heineken's Orchard Thieves, which analysts say could threaten Bulmers' market dominance.
The managing director of Westons has been appointed the new chairperson of the UK's National Association of Cider Makers (NACM)....
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