Britvic’s Irish market has shown no signs of recovery in the short term, and the drinks group promised “decisive action” on costs as the market continued to decline.
In the 28 weeks ended April 15th, Britvic said Ireland continued to be a drag on performance, with the GB, France and international business units all showing revenue growth.
The overall Irish take home soft drinks market value shrank by 2 per cent in the first half of the year, according to Nielsen, although the grocery market grew value by 0.4 per cent outperforming the convenience and impulse market.
Pub and club soft drinks fell by 5 per cent in value, but this period also includes a 2 per cent increase in VAT in January 2012.
“As a result of the scale of continued market decline, the Irish management team has undertaken a further review of the business, with the aim to create a long term, sustainable and profitable business for our people, brands and shareholders,” Britvic said in a statement.
The group said it has moved to address cost-savings and competiveness over the year to date, and plans new initiatives that will last until at least late 2013.
Britvic has also reached a deal on the pension deficit and future pension provisions foir its Irish workers, introducing a cap on salary level eligible for the defined pension benefit and removing of future indexation. The agreement led to the company recognising a one off exceptional gain in the period.
Group revenue was up 1.7 per cent to £641.1 million over the period, with earnings before interest, taxation and amortisation falling 6.9 per cent.
Although the company faced higher raw materials costs, price increases have now been implemented, and fixed costs have fallen by 3.3 per cent.
The group also improved its underlying cash flow and cut net debt over the period.
“The economic backdrop for each of the three core markets in which we operate faces a more challenging environment. High levels of private and public debt, rising levels of unemployment, austerity measures, consumer price inflation and the worsening economic growth expectations have all adversely impacted consumer spending,” Britvic said.
However, the soft drinks category in general continued to show some resilience, the group said, with the GB take home soft drinks market growing by 5.9 per cent in value, according to Nielsen. That takes into account an increase in VAT in 2011. Volume also rose, growing by 0.8 per cent, while carbonates was 2.2 bigger. Still was the only sector to show some decline, falling by 0.5 per cent.
Britvic turned this growth to its advantage, growing revenue by 2.4 per cent, with the carbonates sector increasing in size by almost 7 per cent and gaining further market share.
But the stills sector suffered as premium brands were hit by depressed consumer spending.
Britvic’s French division saw revenue rise by 6.4 per cent, as prices rose by 11.5 per cent. However, volumes fell by 4.6 per cent.
The international division, which includes the US business, saw double digit growth in its revenues over the period, with the company expanding into more US states. Revenue rose by 10.8 per cent, mostly driven by the second quarter.
