Poor weather and rising costs take the sparkle out of AG Barr profits

By MARTIN FLANAGAN
Published on 25/09/2012 00:05

ATROCIOUS spring and summer weather had a greater impact than the adverse economic backdrop on soft-drinks group AG Barr’s halftime trading, chief executive Roger White admitted on Monday.

The Irn-Bru maker, which declined to give a progress update on its £1.4 billion proposed merger with larger rival Britvic, was also hit by a strong rise in raw material prices.

It meant the Cumbernauld-based firm posted a fall in underlying pre-tax profits to

£14.9 million from £16.2m. However, turnover rose 4.9 per cent to £130m in the six months to

28 July, from £124m.

White, who would hold the same job in the new entity if the merger with Hemel Hempstead-based Britvic comes off, said a challenging economic background had contributed to the profits fall.

But he added: “The pouring of rain is much more material in the short term. We see an instantaneous change in consumers’ behaviour. People are holding coffees instead.”

Barr revealed its performance had also been hampered by a strong rise in commodity prices, particularly sugar, and in carton packaging. “Sugar, over the past three years, has seen a very substantial rise,” White said. “At its peak, it was up two and a half times over its long-term run rate. It’s still over double.”

Barr, which also makes Rubicon fruit juice and Tizer, said it was able to pass on some of these raw material price rises to its customers, but had adopted what White dubbed a “middle of the road view”.

He said the group preferred to make “regular rather than substantive” customer price rises, ensuring “prices do not rocket more than consumers can pay”.

Despite the headwinds, the company said it had still beaten the wider soft-drinks market, with its own sales volumes up 2.8 per cent against a 1.5 per cent decline in the wider industry.

It also revealed that sales in the first seven weeks of its second trading half had shown double-digit growth. White said the soft-drinks industry benefited when times were tough because its products were seen as “small affordable treats”.

On the merger talks with Britvic, which the Scottish group initiated this summer, White said he was restricted to merely saying they were ongoing. “I have a lot of lawyers and bankers sitting near me,” he said.

Under the proposed terms released a fortnight ago, shareholders in Britvic, which makes

Robinsons barley water, J20 and Fruit Shoot, would own 63 per cent of a new company. Barr shareholders would hold the remainder. The City Takeover Panel deadline for a deal to be announced, subject to any extension, is 3 October.

Chairmanship of the company passed outside the founding family for the first time in 2009 when Robin Barr ended his 31-year tenure in the post. He remains a non-executive director.

Barr’s interim dividend rises 7.5 per cent to 2.616p from 2.433p. On the stock market, it shares closed up 2 per cent, or 8.9p, at 459.9p. Broker Shore Capital said the latest trading results were “particularly robust given challenging markets”.