C&C shares fall as Bulmers, Magners and Tennent update currency hit

C&C shares fell sharply yesterday as the Bulmers, Magners and Tennent’s drinks firm said that the pressures from the drop in the value of sterling and tough pricing conditions in the UK would unlikely ease anytime soon.

Despite its three main products increasing volume sales significantly, the fall in the UK currency had hit hard.

The shares dropped up to 6% at one stage as it said in a trading update it would post operating profit of €94m to €96m when it reports its 2017 full-year results in May. In 2016, it had a profit of €103.2m.

“The major factor in the decline of group operating profit was the devaluation of sterling. The cost-reduction plans announced in October 2015 completed as planned in the second half.

"The benefits, however, were outweighed by incremental brand investment and price deflation attributable to changes in channel and pack mix across the Group,” C&C said.

Davy Stockbrokers analyst Cathal Kenny said the €96m profit fell a little short of its own forecast for €97.9m. However, the analyst said that amid the tough market conditions that “pillar brands” Bulmers, Magners and Tennent’s are expected to report 3%, 7% and flat growth rates in key markets.

Goodbody Stockbrokers said the company faced pricing difficulties in the UK, and experienced some erosion of market share in some categories in Ireland.

For Ireland, C&C said it increased its share in the long alcohol drinks. It said that a loss of market share in Bulmers draught was offset by growth in pint bottle sales and it continues to prepare for new launches.

In Scotland, the company increased volume sales of Tennent’s, and forecast the volume of Magners sales across the UK in its full-year results would rise strongly though “the large grocery retailers taking share from impulse and convenience and the shift from glass to aluminium are both negative dynamics for brands like Magners”.

C&C said it would review the value of its US brands in in its full-year report.

On the outlook, currency and price pressures would not lift soon, C&C said.

It said it was committed to investing in its main products, but “given market dynamics and consumer concerns we remain cautious on the outlook for our domestic markets and are not anticipating improved trading conditions in the short term”.