C&C fights more sterling headwinds since UK general election

The Bulmers, Magners and Tennent’s drinks firm, C&C Group, says it is seeking further savings and exploring the potential for contract manufacturing as the pressure on sterling following the unexpected outcome of the UK general election last month continues to weigh.

C&C has been exposed to the 13.5% drop in the value of sterling against the euro since the UK voted to leave the EU over a year ago.

It means it makes less money when the revenues generated from the sales of its drinks in the UK from a weakened sterling are translated into euro.

In its trading date, the firm said it was still exposed to a drop in the value of sterling since the Conservatives lost their overall parliamentary majority, saying that if the exchange rate were sustained “our financial performance for the full year will be negatively impacted on account of currency movements”.

Sterling has weakened since the eve of the UK’s vote on June 8, from 86.5p to 88p.

The shares, which slipped slightly yesterday, are now down 17.5% since the start of the year, valuing the firm at just under €1bn.

Nonetheless, C&C reported that trading was satisfactory across its main markets.

In Ireland, it said amid intense competition, draught Bulmers has lost market share but sales have expanded in shops. It said its Bulmers relaunch in Ireland in spring had generated a positive response though “the overall trade has been subdued” when compared with strong beer and cider sales of a year ago.

In Scotland, it said its advertising investments over many years were paying off, with Tennent’s gaining share in a flat market.

Meanwhile, stable trading in the US is still being affected by troubled cider sales.

“We also continue to explore third-party contract manufacturing and distribution opportunities in our core markets as well as further operating efficiencies, to supplement our organic growth plans,” the company said.

Davy Stockbrokers said that it expected to pare back its forecasts for C&C’s operating by 2.2% to around €88m.

“No explicit outlook was provided, but the company noted that if current euro-sterling rates are sustained, full-year financial performance will be negatively impacted,” the broker said.

“It is seeking to supplement organic growth plans and retains significant balance sheet flexibility,” it said.


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