UK: Britvic profit margins to improve in 2012 - analyst
Britvic reported a 14.6% increase in full-year sales last month
Britvic should deliver improved profit margins over the course of next year, despite the group's Ireland unit constraining overall growth, Panmure Gordon analysts have said.
Last month, the UK soft drinks maker reported a 14.6% increase in full-year sales, but conceded that conditions in Ireland remain difficult. The unit experienced a 9.6% drop in full-year sales.
Despite this, Panmure Gordon analyst Damian McNeela has maintained his 'buy' recommendation on Britvic, ahead of the firm's full-year results on 30 November.
"We expect the soft drinks sector to remain resilient in FY 2012 and we expect the company's cost optimisation and efficiency programmes to begin to deliver improved margins resulting in low double-digit annual EPS growth over the next three years," McNeela said.
The analyst said he forecasts a 2% increase in group EBITA, to GBP138m (US$214.7m), compared to a company consensus GBP137.5m, but higher financing costs are likely to result in adjusted profit before tax declining by 2% to GBP107m. This is against a company consensus of GBP105m.
Group operating profit margins are also expected to decline by 110 basis points to 10.7% reflecting the impact of "higher input costs and the margin dilution" associated with the acquisition of Britvic France last year, the analyst said.
Despite this, McNeela added: "The soft drinks sector has continued to be resilient despite the challenging consumer environment, and we expect underlying operating profit margins to improve over the course of FY 2012.
"This should be driven by lower input cost inflation (mid-single digits compared with low-double digits in FY 2011), ongoing cost optimisation programmes and new product innovation and should deliver low double-digit EPS growth over the next three years," he said.
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