C&C to stick with US arm despite writedown

C&C chief executive Stephen Glancey has insisted that the cider and lager maker remains committed to its struggling US business despite a further writedown in its value pulling the group into the red last year.

C&C reported a net loss of just under €73m for the year to the end of February — down from a profit of €47.4m a year earlier — largely driven by a further €129m write-down in the value of its US business. While this was recently flagged, it follows a €150m writedown of US value two years ago, which led to institutional investors calling for a sale of the American business.

C&C has been selling its Magners cider brand into the US for 17 years, but upped its US presence with the €233m purchase of the Vermont Hard Cider company in 2012, but has continued to struggle. US revenues fell by nearly 34% last year.

But, despite admitting that its US investment “hasn’t worked”, Mr Glancey said C&C, which also owns Tennent’s lager, is not “heading for a sell-out” in the US and will take “a long view” on its business there and work at creating good value and returning it to growth in the coming years.

He did, though, note a fiduciary duty to maximise shareholder value.

Since the end of 2015, Los Angeles-based brewer Pabst has held exclusive US distribution rights for C&C’s cider brands, plus a long-term option to buy C&C’s US operations outright.

Overall C&C’s annual net revenues fell by 6.9% to €559.5m, in its latest financial year, while pre-exceptional operating profits fell by €8m — to €95m — due to the effect of a weakened post-Brexit referendum sterling. Revenues fell in each of the group’s core markets of Ireland, Scotland, England, and Wales.

However, management noted volume growth in its core brands amid a tough trading environment, a strong balance sheet — it upped its full-year dividend to shareholders by 5% to 14.33c — and an improving sterling as reasons to be relatively cheerful.

“After this year of consolidation, we are in materially better shape to meet the ongoing challenges and opportunities within our industry,” Mr Glancey said.

While he warned that the group remains cautious regarding the outlook for consumer spending in its core markets, he added that “our core brands of Bulmers, Magners and Tennent’s are well-positioned to convert their volume momentum into revenue and value growth.”

C&C’s share price — one of the worst performers on the Iseq in the last 12 months and down by over 4% since January — was down by over 1.4% at €3.55 yesterday.

C&C also saw volume growth of 60% in its growing premium/craft beer and cider portfolio in the last year, with the division now accounting for 2% of the group’s own brand volume and “starting to make a meaningful contribution to bottom line”.

“Our ambition is to grow this portfolio to 5% of group branded volumes over the medium-term through a combination of in-house product development, new agency wins and partnering with leading local craft brewers,” the company said.

Management also said it is happy with the group’s staff numbers — of around 1,200 — following the cutting of around 260 jobs from facility closures in Tipperary and the UK last year. Analysts remained “cautious” on C&C, however, given market conditions.


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