Fruit Shoot recall could cut Britvic’s profits by £25m

By KAREN REBELO
Published on 11/07/2012 21:50

BRITVIC warned on Wednesday that the recall of its Robinsons Fruit Shoot drinks would hurt its profits far more than expected, raising concerns among analysts that the company’s image could take a hit.

The soft drink maker said the move would cut between £15 million and £25m from its profit before tax across the current and coming financial years.

The group, which recalled the popular Robinsons Fruit Shoot and Fruit Shoot Hydro brands in the UK and France last week over faulty new design caps, also said it expects to report full-year results at the lower end of market expectations before the impact of the recall.

Numis Securities’ analyst Charles Pick said: “Today’s news is not going to be beneficial to Britvic management’s credibility and has escalated considerably compared to just eight days ago.”

The company said last week that it expected the recall to cut profit before tax by £1m to £5m for the current fiscal year.

Shares in Britvic tumbled 13.4 per cent to close at 260.1p, having hit lows of 250p earlier in the session.

Panmure Gordon analyst Damian McNeela said: “It’s certainly a lot worse than what we were initially led to believe.” The brokerage downgraded the stock to “sell” from “hold” and cut its price target on it to 250p from 350p.

“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,” added McNeela.

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.

The firm said it continued to be affected by poor weather and weak demand in the UK.