14th Jan 2015 09:03
LONDON (Alliance News) - Irish drinks company C&C Group PLC saw its shares fall Wednesday after the Magners cider maker said trading conditions in the third quarter were below its expectations, and trading over the Christmas period also was worse than expected.
The group, which makes Tennent's lager and other branded ciders and beers, also said it will commence buying back shares in the market.
C&C said volume was down 3.4% in the three months to end-November, excluding Irish drinks distributor Gleeson Group.
"The market was slow in the period with October and November proving to be particularly quiet months. The group?s core markets, however, are expected to continue to provide resilient levels of profitability and cash flow," the company said in a statement.
Last October, C&C said its pretax profit in the first half to end-August fell despite a rise in revenue, as it was hit by a rise in excise duties, an increase in operating costs, and tumbling US cider sales.
C&C said Wednesday that trading across most of its core markets - England, Wales, Scotland, the US, bar Europe - is still tough, with volumes in the quarter hit by a number of factors, including pricing pressure.
In England and Wales, C&C said pressure on pricing increased in the off-trade channel, and cider volume in the quarter was down 9.8% with net revenue down just over 18%. The group said it is continuing to explore a range of initiatives in both markets, including cost-reduction plans, to return the cider business to acceptable levels of profitability, expand margins, and increase investment behind the brand portfolio.
In Scotland, volume was down 2.4%, excluding its Wallaces Express business in Scotland.
In the US, volume declined more than 16% in the quarter, representing an improvement on the first half, as it said the disruptive impact of new entrants to the market receded. However, the US market is still some way from a return to growth for it.
"The underlying performance trends of the second half provide increased confidence in the brand?s prospects for financial year 2016. We believe that the opening of the new cidery in August, product innovations and better sales execution are having a positive impact. The US cider category remains very attractive and the group is firmly committed to capitalising on the long-term growth potential," said C&C.
Excluding the US, C&C said the underlying performance of the business in other export markets was strong. Volume in Europe increased almost 19% in the quarter, with Magners up 7.1% and Tennent?s up 62%.
"Distribution issues in Australia depressed overall volume in the segment for the quarter but those issues are now resolved. We anticipate a solid distribution platform in Australia in financial year 2016 and the removal of the drag that Australia has proven to be over the last 18 months," the company said.
However, C&C said trading over the Christmas period was again below its expectations in the domestic markets and volume trends were similar to the third quarter.
"Following weaker-than-expected trading conditions in the third quarter, conditions that continued during the Christmas period, C&C is updating its operating profit guidance for financial year 2015. Operating profit in the region of EUR115 million is now anticipated," the company said.
C&C said it has good cash conversion, and low leverage is providing it with balance sheet strength and flexibility.
"Against this background, the board expects to commence buying back shares in the market," the company said.
"Any decision to buy back shares will be within the existing authority granted by shareholders with the board being satisfied that the repurchase meets the group's strict returns criteria and the group maintaining suitable financing flexibility for its needs ? both medium and long term," it added.
C&C shares were trading 7.6% lower in London Wednesday morning at EUR3.47 per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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