Davy Stockbrokers has said that the move towards a "multi-beverage" position, through the integration of the Gleeson business, will help C&C Group boost its Irish profits.
"The operating model in ROI is moving towards multi-beverage, which will aid the protection and growth of domestic profitability," Davy's Cathal Kenny commented.
His comments follow a positive nine month interim management statement issued by C&C, which revealed that volumes for the nine month period to 30 November 2013 were up 3.5% on the previous year in its Irish business. Volume sales were up by 3.5%.
The report said that ROI volume grew in the period, maintaining the improvement in market conditions seen in the first half of the year. The Gleeson business performed in line with expectations, with the ongoing integration programme on-track to deliver forecast synergies.
While the company said it is still on target for an operating profit of €125 million to €132 million, its UK market remains difficult. C&C’s most challenging sector in the UK is the cider category, which decreased by 17.5%. Magners declined in the period driven by the multiple retail channel; on-trade volumes by comparison remained relatively steady. However, lagers appear to be maintaining growth.
“We have made excellent progress developing our multi-beverage capability in ROI and Tennent’s UK. Solid earnings growth and cash generation in both of these businesses provides a degree of balance to a more competitive UK cider market,” the report said.
The C&C report showed that Christmas sales were “satisfactory and in line with expectations”, whereas international sales volumes improved over the same period. “Our international business has seen ongoing distribution transition in both the US and Australia. This, as previously highlighted, has resulted in some sales impact in the US market. In other international markets we continue to develop opportunities for cider and beer and innovate across our portfolio.”
Ireland and Scotland account for about 63% of C&C's earnings. The statement covers the period from September 1, 2013 to January 16, 2014.
Commenting on its performance, Cathal Kenny said: "Our initial reaction is that our FY 2014 EBIT forecast will change little post the update – perhaps a small (c.1%) tweak lower to account for on-going challenges in the UK. […] Despite a heavy period of acquisition-led investment, C&C continues to operate with high levels of financial flexibility."
© 2013 - Checkout Magazine by Genna Patterson
