23rd Dec 2019 10:16
(Alliance News) - Nichols PLC said Monday said it expects 2019 sales to be ahead of the year prior, but warned that profit for 2020 will be "materially below expectations".
Nichols shares were down 14% in London at 1,464.00 pence each on Monday morning.
In a trading update for 2019, the soft drink maker said it expects sales to be approximately 4% ahead of GBP114.6 million a year prior, and pretax profit is expected to be in line with market expectations. Pretax profit in 2018 was GBP31.8 million.
"We are pleased with this performance given the slowdown in the UK soft drinks market and the challenging broader consumer environment," the company said.
However, in an outlook for next year, the company said pretax profit is expected to be "materially below" current expectations, as a result of a 50% excise tax on non-carbonated sweetened drinks recently implemented in the Saudi Arabia and United Arab Emirates.
"This tax will be applied to all non-carbonated drinks containing either natural or artificial sweeteners, including sales of Vimto products," the company noted.
Therefore, unlike with the UK soft drink levy, product reformulation is not an option, the company noted.
Nichols said its annual sales of concentrate to the Saudi and UAE markets is approximately GBP7.0 million, and the Middle East as a whole remains a key strategic market for the Vimto brand.
"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," the company said.
By Loreta Juodagalvyte; [email protected]
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