Update - UK: Britvic to shake-up Irish operations
Britvic says Ireland continues to represent a “harsh macro and consumer environment”
Britvic is to restructure its operations in Ireland as sales in the country continue to slide.
The soft drinks giant said today (21 October) that Ireland continued to represent a "harsh macro and consumer environment" as local revenues dropped by 5% for the 12 months ended 3 October. WHile grocery market volumes in the country were up by 4.7% in Ireland, value dropped by 5.6%. Convenience volumes remained flat and value was down by 8.9%.
As a result, the Mountain Dew producer said it will restructure its Irish operations in order to benefit from a "future return to favourable market conditions".
Speaking on the firm's earnings conference call today, chief executive Paul Moody told analysts that trading conditions in the country remain "extremely difficult with no material signs of recovery in the soft drinks market".
"Our businesses have performed relatively well but were still hit hard due to the economic conditions," Mood said. "We are reviewing value and other assets, and we expect this will result in an impairment charge at the 2010 year-end. We are hoping in the future Ireland will return to more stable market conditions and we are currently consulting with our people."
A spokesperson for Britvic told just-drinks that the decision to restructure is at the "early stages" but that it is very much about getting the Irish business in a "fit state to grow again" when the economy starts growing.
The company would not be drawn on the possibility of job losses. The spokesperson added: "It is at early stages, therefore we cannot say whether there will be any job losses."
Nonetheless, Altium Securities analyst Wayne Browne remained upbeat about the firm's prospects: "Whilst the impairment and further restructuring to the Irish business is a negative and could weigh on sentiment in the short term, we feel the underlying performance of the core business is strong," he said.
For the year, the firm recorded a 14.6% year-on-year increase in group sales to GBP1.14bn (US$1.08bn). Excluding the acquisition of French soft drinks maker Fruité in May, sales rose by 5.9%.
Browne added: "Britvic and indeed the UK soft drinks market have proven to be resilient during the recession and against the economic backdrop, Britvic's defensive qualities are supported by a twice covered yield of 4.4%."
Britvic shares rose 6.10% to GBP499.20 at 2.49pm BST in London trading today.
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