C&C Group’s shares fell more than 10% in early trading after it cut profits expectations and warned that third quarter trading was below expectations.
The Magners brewer saw declining volumes in Ireland and Scotland in the three months to 30 November, while cider volumes collapsed by 9.8% in England and Wales.
Net revenues in England and Wales plunged by 18.2%, with the group blaming “pressure on pricing” in the off trade and “intensifying competition at both retail and brand owner points in the supply chain”.
In Ireland, following solid performance in the first six months of the year, volume (excluding Gleesons) was down 3.4% in the quarter. Volumes (excluding Wallaces) fell by 2.4% in Scotland.
The group, which failed in its bid for the Spirit Pub Company in late 2014, said trading over the Christmas period was also below expectations with volume trends broadly consistent with the third quarter performance.
As a result of this weakness, the drinks maker cut its operating profit forecast to €115m.
Additionally, C&C Group announced it will commence a share buyback programme as the business has cash on its balance sheet that will now not be used for acquisitions after it declined last week to get involved in a bidding war for Spirit Pubs.
Analysts at Investec also cut their full-year revenue expectations by 6.9% to €658.7m this morning – which would represent a near 28% drop from last year’s turnover of €912.9m.
“While the pull back in forecasts will undoubtedly have a short-term impact on the share price, we believe downside will be tempered by the share buyback programme,” Investec said.
C&C’s shares fell by 11% to €3.35 in early trading today.
Its US business also remained under pressure with volumes declining by 16.2% in the third quarter. However, this represented an improvement on the first half performance when volumes fell by 21% as the “disruptive impact of new entrants to the market has receded”.
Excluding the US, the company said that underlying performance in other export markets was strong. Volume in Europe increased 18.6% in the quarter, with Magners up 7.1% and Tennent’s up 62.1%.
Despite the falls in sales volumes, C&C remained relatively upbeat about its prospects in Ireland and Scotland, saying those markets “continue delivering resilient performance through strong, brand-led multi-beverage operating models”.
However, C&C plans to “significantly reduce costs” in England and Wales to try to bring the division back to profitability and increase investment behind its brands.
In December 2014, the group put in place a new €450m five year banking facility to extend the maturity profile of its debt and lower its overall cost of capital.
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|1 month||€ 3.47||-€ 0.13||-3.60%|
|3 months||€ 3.92||-€ 0.58||-14.67%|
|6 months||€ 4.32||-€ 0.98||-22.62%|
|1 year||€ 4.38||-€ 1.03||-23.56%|