UK: Frucor reports 40% profit rise but faces tough conditions in UK

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Despite a shortfall in UK sales, New Zealand-based Frucor Beverages reported a 40% rise in profit after tax of $6.4m during the six months to end of December 2001.

International sales, which now account for one third of total revenues, grew by NZ$26.7m or 230% to NZ$38.3m. New Zealand saw sales rise by 24% to NZ$82.4m, compared to the same period last year.

The company also reported that a rise of 63% to NZ$47.647m in its contribution before marketing (CBM) was ahead of the revenue growth of 55%. The CBM margin of 39.5% of revenues was also 2% points ahead of the previous year.

Commenting on the figures, Frucor said that while its focus on growth in the high value impulse sector of the market was driving improvement, manufacturing efficiency has also improved, with capital investment in new canning facilities 15 months ago reducing costs and improving margins.

In a statement the company said: "The first half of 2001 financial year has been a period of significant development for the Frucor Beverages Group."

"The recent acquisition of the Spring Valley sales and distribution network re-confirms the companies strategic intent of developing a high growth business in the Australian market. The investment in infrastructure in Australia will help the company capitalise on the very good start made by 'V' there and, furthermore, to use this as a platform for launching other innovative value added products."

An initial investment to establish the UK market, as well as an increased spend in the fast growing Australian market, accounted for an increase of $11.754m to $19.634m (up 149% on the same period last year) in the company's marketing investment.

Frucor said the figures were in line with the company's accounting policy: "Much of this investment is an investment for future growth in these fast growing markets."

"The increased investment included the establishment of the European office and the increase in management resources within the business in line with growth expectations."

But while the company performed well in New Zealand and Australia, it also reported that the UK and South Africa produced losses greater than anticipated.

But having recently secured Asda, Texaco, Welcome Break and World News, Frucor intends to continue to increase its UK customer listings.

Frucor's continued investment in the UK will allow it to secure a foothold in the UK's fast growing energy drink market, the company said.

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