UK: AG Barr expected to recoup H1 margins fall as costs recover - analyst
The weather has hurt AG Barr's profits
AG Barr will bounce back from a first-half profits drop to post healthier full-year results, an analyst has forecast.
Before-tax profits for the Scottish soft drinks maker should drop around 7% in H1 compared to a year earlier, according to an Investec note today (27 July). However, higher margins in H2 thanks to underlying sales growth and lower costs should see the year end close to expectations, the note said.
“[AG Barr] is encouraged that its marketing plans are delivering good sales momentum in a tough market, and we have some confidence this should continue into H2,” it said.
Earlier today, AG Barr released an H1 trading update that forecast a fall in profits on the back of bad weather and higher costs.
Investec said some of AG Barr's costs in the first six months of the year came from increased marketing spend as the company tried to “avoid the added expense and noise around the Olympics”.
It also said the record wet weather in the UK over the same period is unlikely to repeat next year, allowing higher margin impulse buys - knocked off kilter by the rainfall - to further boost margins.
Future spending on a planned new plant in Milton Keynes should not affect full-year results too much, Investec added.
“Also, the strongest carbs category continues to be energy and Barr can see this reflected in its stronger sales of Rockstar, but this is a franchised rather than an owned brand,” the note said.
AG Barr will announce its H1 results on 24 September.
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