Drinks recall to hurt Britvic earnings
The British soft drink maker said the recall would cut between £15 million (€11.9m) and £25m from profit before tax across the current and next fiscal years. Britvic, which recalled the two brands last week over faulty new design caps, said it expects to report full-year results at the lower end of market expectations before the impact of the recall.
“Today’s news is not going to be beneficial to Britvic management’s credibility and has escalated considerably compared to just eight days ago,” Numis Securities’ analyst Charles Pick said in a note.
The company said last week that it expected the recall to cut profit before tax by £1 million to £5m for the current fiscal year.
Shares in Britvic fell nearly 17% yesterday morning to a three-year low.
The stock was one of the biggest losers on the London Stock Exchange.
“It’s certainly a lot worse than what we were initially led to believe,” said Panmure Gordon analyst Damian McNeela.
The brokerage downgraded the stock to “sell” from “hold” and cut its price target on it to 250 pence from 350 pence.
“The bigger fear is the extent to which relationships with the retailers will be damaged from this . . . and how quickly they’ll be able to retake market share.”
Robinsons and Fruit Shoot are among the company’s most popular brands.
Britvic, whose own brands include Tango and J2O soft drinks, said it was unable to speedily resolve the issue regarding the faulty caps, despite its ongoing investigations. It would use an alternative cap for the packs in the meantime.
“We will start to re-supply customers in six weeks, with a gradual increase to enable us to meet historic levels of demand within six months.”
Britvic, which also produces and sells PepsiCo Inc’s brands such as Pepsi and 7UP in Britain and Ireland, said it continued to be affected by poor weather and weak demand in Britain.
