C&C Group Impacted By Currency Headwinds and Accelerated Investment
Currency headwinds and investment in marketing and price support have impacted the first half performance of C&C Group, the Irish and UK beer and cider producer. Net revenue at constant currency declined by 8.1% to €307.0 million in the first six months ended 31 August 2016. However, net revenue in C&C Group’s domestic markets for its combined Bulmers cider, Tennent’s lager and Magners cider brands declined by only 0.8% in the first half.
Reported operating profit before exceptional items fell by 7.9% to €55.1 million, although incremental investment in marketing (+€3.6 million in core brands) and price support were significant factors. Operating profits in Ireland stabilised following a challenging time in C&C Group’s last financial year.
The fall in the value of sterling particularly following the Brexit vote undermined reported first half revenues and operating profits by €24.4 million and €2.8 million, respectively.
Stephen Glancey, chief executive of C&C Group.
Stephen Glancey, chief executive of C&C Group, comments: “In the first half Bulmers grew by 6%, Tennent’s by 2% and Magners by 11% supported by increased brand investment and organisational focus. It is also pleasing to note continued growth in export with Tennent’s volumes particularly strong up 50% in the period. While reported earnings have been impacted by a combination of accelerated investment and currency we believe that this level of investment ultimately underpins long term brand values.”
C&C Group’s consolidation and efficiency programme is going to plan. As part of the operational consolidation the group invested €9 million in a new PET bottling line at Clonmel in Ireland during the first half and sold its bottling operations in Shepton in England for €9 million, while also completed the disposal of its cidery in Shepton Mallet.
“We remain on track to deliver the €15 million of targeted cost savings and efficiency gains,” he says. “With improving utilisation rates and stable input cost environment, we now have a well-invested, low cost manufacturing platform that will enable our brands to compete effectively in price sensitive markets.”
Stephen Glancey continues: “In the first half we have seen some variability in consumer demand and are cautious on forward consumer reaction to political and economic conditions in our core markets. However, we have a business that is capable of weathering these challenges and our confidence in the medium to long term outlook is based on the strength of our key brands, our business model and leading positions in Ireland and Scotland – where fundamentals remain strong. We also have a growing export business; a broadening portfolio of premium and speciality beers and ciders; and the right partner for our US brands. Our cash generative nature and balance sheet strength should ensure attractive returns for shareholders. We are well placed to either capitalise on the opportunities which may arise from the current phase of consolidation in our industry or return capital to shareholders.”
