C&C Group plans to invest heavily to continue growing its core cider business outside of the UK and Ireland.
Strongly growing demand for Magners cider in the US and Australia afforded C&C Group a little protection from tough conditions in the UK and Ireland in the firm’s fiscal half-year. International cider sales rose by 34% in both volume and value for the six months to the end of August, the firm said today (12 October).
Although international cider sales only contributed EUR11m (US$15.2m) to group sales of EUR305.5m in the half-year, the firm has taken the division’s performance as evidence that it can help to combat tough conditions for Magners and Bulmers in their respective home markets of the UK and Ireland.
For all of C&C Group’s recent wheeling and dealing, the performance of its original Magners brand remains key to the firm’s fortunes. “If Magners doesn’t do well, we don’t well,” C&C Group’s CEO, John Dunsmmore, told analysts on a conference call. C&C Group’s original cider business, comprising Magners and Bulmers, contributed 77% of the firm’s operating profits in the six-month period, despite the on-track integration of the likes of Tennent’s and Gaymer Cider Co.
The contribution of international cider, Dunsmore said, was “very small, but it’s got the scope over time to become meaningful”. He said that the firm would continue to invest in Magners exports and appeared to leave the door open to further acquisitions.
C&C achieved a net cash surplus of EUR20.8m in the half-year and said that the strength of its underlying balance sheet was “clear”. The firm said: “This strength will provide stability in volatile markets and positions the group well to invest further for growth and expansion.”
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By GlobalDataCommenting on the disposal of the firm’s spirits & liqueurs business to William Grant & Sons, Dunsmore told analysts: “We wanted to be flexible for whatever we might want to do going forward – we didn’t want to be cash light.”
However, the firm said that it expected the pace of international sales growth to slow in the second half of the year, as it cycles tougher comparison numbers. Kenny Neison, C&C Group’s strategy director, said that there was still a a lot of work to do to “make the Rest of World business more meaningful”.
For now, Magners’ performance in the UK remains crucial to C&C Group. Dunsmore praised a 0.7% rise in Magners cider volume sales in the UK during the half-year, following around three years of consistent decline.
“For us its quite a marked moment,” he said. “We’re pleased that we’ve got back to a level position and we believe that we’re on-target to grow Magners in-line with the cider market this year.” UK-wide cider sales rose by 4% in volume terms during the six-month period.
Still, C&C Group said it was cautious on trading in the UK due to the macroeconomic outlook. “The UK is now moving into a tough environment for consumer,” said Dunsmore. Ireland, meanwhile, is expected to remain difficult.
The firm said that it remains “confident of delivering to market consensus for operating profits in the range of EUR102m to EUR106m for 2010/11”.
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