Irn-Bru maker AG Barr (BAG) has lost more than a quarter of its value today after issuing a shock profits warning.
The drinks manufacturer’s shares have plummeted 28.1% this morning back to 624.8p after announcing its profits will be 20% lower year-on-year due to poor UK weather and weak performance of its secondary brands.
Analysts had been predicting AG Barr’s profits to rise by around 5% annually from last year’s figure of £46m after its reformulation of core ranges softened the impact of the advent of last year’s sugar tax.
The company’s shares had risen to an all-time high of 980p last month on expectations of continued growth of market share and an expectation of increased margin performance.
However, AG Barr said this morning that first half sales are likely to be down 10% as volumes have been hit by poor UK weather, its efforts to push through price increases and the disappointing performance its Rockstar energy and Rubicon juice brands.
It said this morning it has taken action to address specific brand-related issues, including the planned launch of three new Rockstar products at the end of the summer, and recipe improvement activity for Rubicon juice drinks.
The benefits, however, would not be felt until later in the second half of the financial year.
Nicholas Hyett of Hargreaves Lansdown commented: “To say this is a curve ball is an understatement.”
“Consumer goods companies like AG Barr are supposed to be reliable compounders, with sales that turn up come rain or shine. Unfortunately the combination of price changes and a bit more rain than shine has seen sales of Barr’s soft drinks trailing behind last year’s performance, and profits struggling even more.”
Barclays added: “The next six to ten weeks will be critical for the stock with new formulations and product launches along with the rest of summer trading. Further risk to profits cannot be ruled out with tough comps and any further weather impacts.”
Fellow soft drinks firms Fevertree and Britvic were also caught up in the sell-off of the sector today, falling by 1.3% to 2,161p and 1.9% to 868p respectively. Vimto producer Nichols also fell 1% to 1,673p.
However, Hargreaves Lansdown’s Hyett stressed it is “important not to lose sight of some of AG Barr’s underlying attractions”.
“The group’s got net cash on the balance sheet which will help it weather the storm, and a loyal customer base for its core Irn-Bru brand – which has not been caught up in the recent troubles. In the long term those strengths should tell.”
Despite today’s falls, AG Barr shares are down only 7.7% year-on-year after their strong recent performance.
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