Cider house rules as C and C profits rise

STRONG cider sales helped push up first-half earnings at C&C Group, offsetting falling profits at its Tayto crisps division.

The company said pre-tax profits in the six months to end August were 31% higher at nearly €50 million, mainly due to continued sales growth of Bulmers cider in Ireland and the launch of the drink (under the Magners label) in Britain.

Overall, cider sales were 28% ahead at €144.5m and the division yielded an operating profit of €45.1m - 27% higher than the same period in 2004.

C&C chief executive Maurice Pratt said Bulmers had outperformed the overall Irish alcohol market with an 8% rise in volumes, compared to a 1% increase for the market as a whole.

The company said the pub market was beginning to recover ground after the smoking ban, with bar sales down 4% in the first half of 2005 compared to a 9% decline in the previous six months.

In Britain, the launch of Magners in London led to an increase of 112% in sales volumes. Mr Pratt said the company is looking to launch Magners in other regions of Britain.

The good performance by Bulmers eased the pain of a 20% fall in profits from the company’s soft drinks and snack food arm.

The fall in profits was caused mainly by Tayto crisps, where sales were down almost 4%, despite the launch of the Honest range of products.

Mr Pratt said he believed that Honest would be a hit with consumers as more people switch to low-fat and healthier foods.

Sales at the soft drinks and snack food division were nearly 1% lower at €129.2m, with operating profits slipping €3.3m to €13.3m.

The company’s spirits arm, which includes Tullamore Dew whiskey and Carolan’s Irish cream, booked a 12% rise in profits to €7.6m on sales of almost €29m. Carolan’s had a disappointing six months, Mr Pratt said, even though its main rival Baileys had seen better market conditions.

C&C’s distribution division also saw profits fall 20% (to €2.4m) as its profit margins were eroded. The company will take a €3m hit after the loss of a contract to distribute Allied Domecq brands in Ireland.

C&C will also face some disruption as it finds a replacement for Allied to distribute its brands internationally.

Earnings for the full year, which ends next February, will be lower as C&C will be hit from the loss of the Allied contract and from disruption caused by switching to a new distributor abroad.

This will reduce earnings per share (EPS) growth from double digit levels to single digit growth.

Shareholders will get an interim dividend of 6.5 cents a share, up 18% from a year ago, which will be paid out of EPS of 16.2 cents.

Shares in C&C Group gained 2.4% yesterday to €5.26. They have risen by 120% over the last year.