Rugby success is welcome tonic for C&C cider sales

SUNNY WEATHER and successful rugby results boosted sales at C&C over the last 10 weeks, the company said yesterday, as it reported a “mixed” start to its financial year and reported declines in profits, margins and sales for the year to the end of February.

The makers of Bulmers and Magners cider said it had “enjoyed some respite from the deteriorating economic conditions” in Ireland as a result of the late timing of Easter, better than normal weather and the Irish rugby team’s Grand Slam victory.

The company’s outlook elicited a positive response from shareholders, with the stock climbing 7.7 per cent to €1.94 on the Iseq index, up 14 cent.

Volumes of Bulmers are up 10 per cent on the same period last year, with revenue growing in line, the company said. The launch of Bulmers and Magners Pear in recent weeks has been “better than expected”, CC chief executive John Dunsmore said, with an “encouraging” early pipeline fill for the drink, which the company is backing with a television and outdoor advertising campaign.

But growth in sales of Magners draught have been “a bit slow”, Mr Dunsmore said. A 9 per cent growth in sales volumes in Magners was largely the result of “substantial promotional activity” for can multipacks in supermarkets, where discounting led to lower operating margins and dragged down revenues. Excluding currency effects, revenues in Britain are down 5 per cent compared to the same period last year.

CC reported its full-year results for the year to the end of February, which as expected showed double-digit declines in revenue as demand for cider was subdued due to a combination of poor weather and weak consumer confidence.

Revenue declined 11 per cent to €514 million during the year, while the company’s financial statements confirm that it will be writing down the value of its manufacturing plant in Clonmel by €130.6 million and taking an €11 million writedown on excess apple juice stocks.

During the year, the drinks group saw its operating margin eroded by 3.3 percentage points year-on-year to 17.9 per cent.

The company made a pretax loss of €65.8 million for the year. Operating profit arrived at €90.2 million, down 27 per cent as a result of the second consecutive summer of poor weather and the strengthening of the euro against sterling, which reduced its competitiveness in the UK. In its spirits and liqueurs division, which includes brands such as Tullamore Dew and Carolans, revenue increased 1.3 per cent in the year to February.

But the division has had a slow start to the year as retailers and distributors cut back on inventories, leaving shipments down 18 per cent and revenues down 28 per cent compared to last year.

CC said its pension fund has a deficit of €45.5 million, higher than the €30 million estimated earlier this year.

“We remain very cautious,” Mr Dunsmore said. “In both our main markets in GB and Ireland, the macroeconomic environment has been very difficult.”

Goodbody Stockbrokers analyst Liam Igoe said the steadying of cider sales was “reassuring” after a “tough” year last year, while Davy Research analyst Barry Gallagher said margin pressures in the British off-trade market were likely to be a “temporary issue” with less discounting over the key summer months.