UK: Costs to hold back AG Barr in H1 - analyst
AG Barr expects to report a 3.5% increase in first-half net sales
Higher costs could hold back AG Barr's first-half profits, but earnings are still expected to increase, according to Panmure Gordon analyst Damian Mcneela.
In July, the UK soft drinks firm said that it expected to report a 3.5% increase in first-half net sales, despite "increased competitive activity and unfavourable weather patterns". The company, which has not provided profits guidance, is due to release its half-year results tomorrow (27 September).
Mcneela, however, said he forecasts overall gross profit margins to drop by 30 basis points due to rising input costs. However, the analyst expects that adjusted operating profits will still rise by 1% on the same period of last year, to GBP16.9m (US$26.5m).
In addition, extra distribution should aid sales. "Sales momentum is reported to have increased during the period despite the challenges posed by higher input costs, weak consumer markets and recent poor weather trends," Mcneela said.
He added: "We expect adjusted PBT [profit before tax] to increase by 3% to GBP12.1m, as the company benefit's from a lower net interest charge driven by a reduction in net debt from GBP16.4m at FY 2011 to GBP11m. A lower tax rate should assist EPS growth of 4% to 31.8 pence."
AG Barr is currently undertaking a GBP10m upgrade of its Cumbernauld, UK site. However, in July, the firm said that it had been hit with delays. Investors, then, will also be keen to hear an update on the progress of work at the site.
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