Costs put pressure on Britvic profits

Soft drinks company Britvic has said trading in the second quarter has been strong across Ireland and the UK.

The firm said that the Irish soft drinks market remains "challenging", while the British and French markets continue to demonstrate "resilience", as the UK's take-home market volumes rose by 2.9% year-on-year in the four weeks to January 22.

This was a period and channel where Britvic captured both volume and value share.

The firm said: "However, the pace of input-cost inflation in recent weeks has been unprecedented, leading us to revise the full-year UK and Ireland input-cost inflation guidance to 9-11%. In particular, we have been adversely impacted by sharp recent increases in the price of PET, steel and sugar.

"The forecast of particularly challenging input-cost inflation pressure for Britvic France, given its product mix, remains unchanged. "

"The escalation in input costs comes after the completion of this year’s price-negotiation process, meaning that we do not expect to be able to recover or mitigate in full the additional input-cost increases we now expect this year.

"The input-cost inflation will impact the outcome for both the first half and full year, and means we do not now expect any operating-profit margin improvement in 2011, excluding the impact of France."

Despite these headwinds, Britvic fully expects this year’s operating profit performance to be materially ahead of the 53-week result reported for financial year 2010.

Paul Moody, Chief Executive, said: "Since our last update to the market we have witnessed a rapid and unprecedented uplift in the cost of key raw materials. This has been driven by a shortage of supply to the market, where, for example, we have seen prices for PET, derived from oil, surge by around 20% in the last month alone. We do, however, remain confident about the medium to long-term outlook for the business, and we look forward to providing more details on the latter at the annual investor seminar on 23rd March 2011."