Britvic shares drop by 10%, profits to be lower

Britvic shares drop by 10%, profits to be lower

Britvic's share price has slumped by 10% after it warned that higher-than-expected input costs will hit profits in its current fiscal year.

Unprecedented rises in the price of key raw materials, such as PET plastics and sugar, have prompted Britvic to double its projected increase in input costs, the soft drinks producer said today (24 February).

It said that input costs are set to be between 9% and 11% higher in its current year, which runs to the beginning of October. That compares to guidance issued only one month ago of a 5% to 6% increase.

The Robinsons and Tango maker saw its share price slide by 10% in early trading on the London stock exchange as analysts warned that profits will be hit. Evolution Securities said that full-year profits could be between 10% and 15% lower than the current analyst consenus forecast.

"With management credibility likely to be questioned in the aftermath of this statement and further negative risks to earnings, given the on-going volatility of the oil price in particular, we move to neutral from buy," said Evolution.

Britvic's CEO, Paul Moody, said: "Since our last update to the market we have witnessed a rapid and unprecedented uplift in the cost of key raw materials.

"We do, however, remain confident about the medium to long-term outlook for the business," he added. Britvic still expects full-year operating profits to be ahead of the GBP135m (US$217.4m) reported in its last fiscal year, to 3 October 2010.