Inflation pressures see Irn-Bru maker AG Barr hike prices but profits fizz
Irn-Bru maker AG Barr has revealed that the prices for some of its products have been hiked due to inflation but profits are fizzing.
Bosses at the Cumbernauld-based company said they have seen rising costs for raw materials, including packaging and energy bills, leading to cost-cutting measures, adding that they have “adjusted our pricing with customers where appropriate”.
The comments came as the group reported that profits are likely to be ahead of expectations set out in an upgrade announced in November.
In the 12 months to the end of January sales are expected to top £267 million - up 17.5 per cent compared with the previous year - beating the pre-pandemic period, when sales hit £255.7m.
Barr, whose other brands include Rubicon, said this was despite the recent trading restrictions due to the spread of Omicron which led to pubs, bars and restaurants facing reduced trade.
In a trading update, the firm told investors: “While government restrictions have impacted consumer behaviour across the year, both our Barr soft drinks and Funkin business units have traded well, particularly during the periods when restrictions were eased.”
Inflation remains problematic for the brand and the company said it will “seek opportunities across the coming year to offset the impact on our business”.
Operating margin before exceptional items for the financial year is expected to be around 15.6 per cent, up from 14.8 per cent, delivering profit before tax and exceptional items “marginally ahead” of the November guidance.
Chief executive Roger White said: “We are delighted with both the resilience our business has demonstrated and the growth we have delivered.
“We have remained fully operational throughout the year, producing high quality products and providing strong business support to all of our customers.
“We have delivered an excellent financial performance against a volatile backdrop, whilst at the same time delivering on our strategic priorities. We plan to further invest in our business in 2022/23 and remain confident in our ability to deliver continued growth in both revenue and profit in the coming year.”
Full-year results are expected to be announced on March 29.
John Moore, senior investment manager at Brewin Dolphin, the wealth firm, said: “Inflation is a challenge, but the company is taking steps to mitigate that pressure and its operating margin is slightly better than last year’s, with profits expected to be ahead of guidance too.
“Although AG Barr has traditionally tended to err on the side of caution, with around £66 million of net cash shareholders should expect to see rewards for their patience and you wouldn’t rule out further earnings-enhancing investments in other businesses.”
Analysts at house broker Shore Capital Markets noted: “Both Barr soft drinks and Funkin are said to have ‘traded well’ (particularly when restrictions were eased), and, encouragingly, we believe growth has been broad based, with core brands likely to be ahead of pre-Covid sales level once all the books are closed and totalled.
“Management has previously highlighted the inflationary pressure, particularly across packaging and energy costs, which have come through as expected.”
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