23rd Dec 2019 07:56
(Alliance News) - UK soft drinks maker Nichols wasn't dreaming of sugar plum fairies on Monday. Instead, it warned investors it expects to take a big hit to profit next year due to new taxes on sweet drinks, this time in Saudi Arabia and the UAE.
Sales in 2019 are expected to be 4.0% ahead of the year before, a performance Nichols said it was "pleased" with given a slowdown in the UK market and a challenging consumer environment. Sales in both the UK and the International businesses are ahead of 2018.
Annual pretax profit is expected in line with market forecasts.
However, Nichols noted that in the Middle East, Saudi Arabian and UAE tax authorities have recently implemented an excise tax of 50% to be levied on the retail price of non-carbonated sweetened drinks.
This tax will be applied to all non-carbonated drinks containing both natural and artificial sweeteners, including sales of Vimto products. This means that, unlike the UK soft drinks levy, product reformulation "is not an option".
"Whilst it is difficult to estimate the future effect on sales volumes of the Vimto brand in these regions, at this point in time, we have to assume the increased retail price will have a negative impact from 2020," said Nichols.
In order to mitigate the impact, Nichols said it is currently developing plans in collaboration with its long-term in-market partner which will require increased investment in the Vimto brand to maintain its market position.
While there is a "broad" range of possible outcomes, Nichols said pretax profit in 2020 could be "materially below" current expectations as a result.
Other brands in Nichols portfolio are Feel Good, Starslush, ICEE, Levi Roots and Sunkist.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 20.28 points, 0.3%, at 7,562.2
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Hang Seng: marginally higher at 27,876.98
Nikkei 225: closed marginally higher at 23,821.11
DJIA: closed up 78.13 points, 0.3%, at 28,455.09
S&P 500: closed up 0.5% at 3,221.22
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GBP: down at USD1.3015 (USD1.3051)
EUR: flat at USD1.1082 (USD1.1087)
Gold: up at USD1,484.31 per ounce (USD1,478.61)
Oil (Brent): flat at USD65.96 a barrel (USD65.80)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
0830 EST US Chicago Fed national activity index
1000 EST US new residential sales
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Beijing will lower import tariffs on over 850 products including frozen pork from January next year, the finance ministry said, which may help ease the pressure on the country's depleted pork supply. China has been hit by a severe pork shortage after African Swine Fever tore through the country's pig herds. More than a million pigs have been culled due to the disease, according to official statistics, and prices of the staple meat have more than doubled. Monday's announcement said tariffs on frozen pork will drop from 12% to 8% from January 1. According to the announcement from the Tariff Commission of the State Council, the changes will optimise "the trade structure and promote the high-quality development of the economy". Other products which will have lower import tariffs include food products – such as fish, cheese and nuts – pharmaceuticals and a range of chemical products. China said from July 1 next year, it will also further reduce some tariffs on some technology products, said the ministry in a statement on its website. Goods from countries including New Zealand, Peru, Costa Rica, Switzerland, Iceland, Australia, South Korea, and Pakistan will also be subject to even lower levies under re-negotiated bilateral trade agreements, according to the statement.
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Under-fire Australian Prime Minister Scott Morrison rejected calls for "reckless" and "job-destroying" cuts to the country's vast coal industry in the face of a deadly climate-fuelled bushfire crisis. Morrison's conservative government has fiercely defended the lucrative coal industry in Australia, which produces a third of global coal exports and provides work in key swing electoral districts. "I am not going to write off the jobs of thousands of Australians by walking away from traditional industries," Morrison told the Seven Network, in one of several morning interviews rejecting calls for further action. Morrison's media blitz came as he sought to limit the political fallout from a much-criticised Hawaiian holiday – taken as bushfires destroyed an area the size of Belgium and unleashed toxic smoke into Australia's major cities.
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BROKER RATING CHANGES
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JPMORGAN RAISES BAE SYSTEMS PRICE TARGET TO 600 (585) PENCE - 'NEUTRAL'
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COMPANIES - FTSE 100
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NMC Health said it will be commencing an independent, third-party investigation into claims made by short seller Muddy Waters. Muddy Waters last week alleged "rot" at NMC, with the UAE-focused healthcare firm believing the claims led to an "unwarranted" share price reaction. The stock is down 50% in the past seven days. The independent review will be overseen by a committee made up of a majority of independent non-executive directors. "We are confident that this review, when complete, will be entirely confirmatory of the disclosures provided by the company to date. We will also be progressing relevant legal and regulatory options following the actions taken by third parties to mislead the market and manipulate the share price," said NMC. It added that it believes its current share price is "not a fair reflection of the value of the company" which has a "consistent track record of strong growth and cash generation".
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Miner BHP Group said Chief Executive Andrew Mackenzie will be leaving three months earlier than planned. Mackenzie's departure was announced in November - he was previously anticipated to leave the FTSE 100 mining giant on June 30, having stepped down from the executive team at the end of 2019. In his place, the head of BHP's Australian operations Mike Henry was appointed CEO. However, on Monday BHP said Mackenzie will now be leaving the company on March 31. His planned departure from the CEO role is still the end of 2019, and BHP said the transition is going well. BHP did not say why the date has been moved forward.
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Miner Anglo American said it has received the next phase of its operating licence for the Minas-Rio tailings facility in Brazil. This follows works to raise the dam as part of the Step 3 licence area of the mine. "This is an important milestone for our Minas-Rio iron ore operation in Brazil towards reaching its full potential...We expect Minas-Rio to produce 23 million tonnes in 2019, with an FOB unit cost of [about] USD24 per tonne," said Seamus French, chief executive of Bulk Commodities.
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ViiV Healthcare said Saturday it has received a complete response letter from the US Food & Drug Administration related to its application for cabotegravir and rilpivirine long-acting regimen for treatment of HIV-1 infection in virologically suppressed adults. The FDA sends a complete response letter if it determines to not approve a new drug application in its current form. ViiV, a joint venture of GlaxoSmithKline, Pfizerand Shionogi, said the reasons given by the FDA for its rejection relate to chemistry manufacturing and controls, rather than any safety issues. It said it will work with the US regulator to determine next steps for the application.
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The US drug regulator has approved Enhertu for the treatment of adult patients with unresectable or metastatic HER2-positive breast cancer, makers AstraZeneca and Daiichi Sankyo said late Friday. The US Food & Drug Administration approved the breast cancer indication for Enhertu under accelerated approval, based on tumour response rate and duration of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial, the two companies said.
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COMPANIES - FTSE 250
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intu Properties said it has sold the intu Puerto Venecia shopping centre in Spain for EUR475.3 million. intu Puerto Venecia is a joint venture between intu and the Canada Pension Plan Investment Board, which was formed in 2015. The transaction is part of the shopping centre owner's strategy of fixing its balance sheet, and the deal will deliver net proceeds of around EUR115 million after repaying asset-level debt, working capital adjustments and tax. intu will use the money to repay debt, with the transaction reducing loan to value by around 1%.
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The family behind aerospace and defence company Cobham has attacked the UK government over its decision to give the go-ahead to a GBP4 billion takeover of the business by a US private equity firm. A merger between the Dorset-based manufacturer and US firm Advent International was agreed in July but was delayed due to national security concerns. The UK government signed off the takeover on Friday after Advent proposed a number of legally binding obligations to protect the UK's interests. These include the ongoing protection of sensitive government information and requiring prior notice to the Ministry of Defence and Home Office on any future plans to sell the Cobham business. Nadine Cobham – daughter-in-law of the firm's founder Alan Cobham – said the decision was "deeply disappointing" and accused the government of "handing control away". Alan Cobham founded the business in 1934 as Flight Refuelling Ltd, specialising in air-to-air refuelling technology. It was floated in 1985, although the family maintained a large stake.
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COMPANIES - INTERNATIONAL
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Switzerland's Roche Holdings is to buy the rights to a Duchenne muscular dystrophy treatment for USD1.2 billion, it said. Roche will be paying USD750 million in cash and USD400 million in shares to Sarepta Therapeutics Inc for the rights outside of the US to SRP-9001, an investigational gene therapy for the condition. Sareta is also entitled to a potential further USD1.7 billion if a number of regulatory and sales milestones are met in future, Roche added. It will also get royalties. Sarepta will continue to work with Basel-based Roche to develop the treatment, Roche added.
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Monday's Shareholder Meetings
SIG (re sale of AHD)
Mila Resources
YOLO Leisure (re Name change to Asimilar Group)
United Oil & Gas (re vote on Rockhopper Egypt buy)
Creo Medical (re fundraising & firm placing)
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By Tom Waite; [email protected]
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