AG Barr, the maker of Irn-Bru and other soft drinks, has blamed the wet summer for taking the fizz out of sales and warned that annual profit will be lower than expected.
Reporting figures for the first half of the year, the Scottish company said bad weather in August had hit drinks sales.
As a result, annual pretax profit before exceptional items will be about 5% lower than the £44m forecast by analysts and roughly in line with last year’s £42m figure.
The company’s shares fell 5% to 534p, down 10% this year.
In the six months to 25 July, pretax profit before one-offs rose 3.3% to £17.8m. Statutory pretax profit fell 11.3% to £16.9m as revenue fell to £130.3m from £135.7m.
Roger White, AG Barr’s chief executive, said the first half was affected by fierce competition between drinks makers and an internal overhaul of the company’s systems that put investment and promotional activity on hold. AG Barr then faced weather that was much worse than the hot spell the year before.
“We came out of a tricky trading six months and we had a plan to make up the ground we felt we had lost in the first half but the weather in August right across the UK on a comparative basis was not good and the soft drinks market suffered reasonably badly and we didn’t start the half as quickly as we would have liked,” White said.
AG Barr’s sales fared worse in the first half than the wider soft drinks market, which fell 0.6%. White said this was because the company was distracted by its reorganisation and because the weather was particularly bad in its heartland of the north of England and Scotland.
“As a consequence of the geographies we operate in, weather patterns and our internal challenges, we have slightly underperformed the market but with most of our key brands we’ve held market share,” he said. As well as Irn Bru, AG Barr produces Strathmore mineral water and Rubicon exotic fruit drinks.
Sahil Shan, an analyst at the stockbroker N+1 Singer, said: “Momentum for various reasons has failed to pick up in the third quarter, and management is now guiding to a flat year-on-year profit before tax outcome for the year. Our sell [rating] this year on the grounds of forecast risk and low growth expectations relative to a full rating has served us well, and we maintain our cautious stance.”
White said AG Barr’s underlying business remained sound with strong cash flow. The interim dividend increased 8% to 3.36p a share.
