Weak cider sales set to hit C&C first-half profits

Poor cider sales resulting from the bad summer and tougher competition could leave first-half profits at drinks group C&C trailing 2006 by as much as €40 million.

The group's share price plummeted by over 25 per cent to €6 from €8.23 yesterday after it warned that operating profits for the six months ending August 31st, could be 35 per cent down on the same period in 2006.

Last year the company reported operating profits of €113.5 million for the period, which is the first half of its financial year.

A 35 per cent fall on this would leave its operating surplus at just over €73 million.

In a statement, the company said that trading performance deteriorated at an unexpected rate during the second half of July, and sales Magner's cider (known as Bulmer's in the Republic) for the month declined significantly on last year.

"This weak performance primarily reflects the sustained period of extremely poor weather in Britain and Ireland and also increased competition in Britain," the statement noted.

It added that taking into account that July's poor sales would have a knock-on effect in August, it expected its first-half performance to be behind that of last year's.

"Accordingly, the group would expect that in the half year to August 31st, 2007, operating profit outcome will be down by circa 35 per cent on the prior year," the statement indicated.

"The scale of the decline reflects weaker cider volumes combined with substantially higher manufacturing and marketing costs."

Chief executive Maurice Pratt told The Irish Times that the predicted 35 per cent fall in profit was not just down to a drop in the volume of cider it has sold over the last six months, but also reflected spending on increased manufacturing capacity and on marketing. "We have capital expenditure this year of €170 million," he said.

Mr Pratt acknowledged yesterday that this week's warm weather has arrived too late for the company.

The rapid expansion of Magner's cider in Britain has been the main growth accelerator at the group over the last two years.

He explained that the May to July summer period is key in building sustained sales as it is during this time frame that it recruits most of its new customers.

However, he could not say if the impact of losing this key period would last into next year. "We have not given any guidance on that.

"Our expected growth did not materialise and we need to see just how the first half concludes before we can give any future guidance. That's where we are right now."

He added that the group would know more by the time it releases figures for its first half early next October.

C&C is waiting for Competition Authority approval for the sale of its soft drinks and Ballygowan mineral water business to Britvic plc.

The company also announced that it had bought 600,000 of its own shares at €7.958 each, a total of almost €4.8 million, late on Tuesday.

The share buyback was part of an ongoing programme. The group intends continuing with this.