Higher material and marketing costs have impacted on margins
Drinks maker AG Barr has warned first-half profits will be lower than last year as a gloomy start to the summer and higher material costs have hit margins.
Barr attributes those costs to increases in ingredient costs, brand investment and “adverse changes to our sales mix at brand, pack and channel level”.
The IrnBru maker said it anticipates margins will improve in the second half, though any improvement is unlikely to offset the margin shortfalls of the first half.
Despite cost pressures and unseasonable weather over much of the first half, Barr expects to report a 4.5 per cent rise in first-half sales.
Cumbernauld-based Barr said in a statement: “In recent weeks the weather has been extremely poor, with record levels of rainfall and we expect this will have had a further negative impact on market performance when the data is available for the remainder of June and July.
“During these difficult trading months, AG Barr has continued to grow strongly ahead of the market and we anticipate sales revenue of [circa] £130 million, an increase of over 4.5 per cent on the prior year.”
Barr cites market data compiled by Nielson for the 26 weeks to June 23 which shows the market was flat for fizzy drinks and still drink volumes fell by three per cent, though there was an 11 per cent rise in sales of energy drinks.
In June, Barr extended its sale and distribution deal with US energy drink maker Rockstar Inc, agreeing a new 15-year franchise deal with Rockstar, which both parties first entered into in 2007.
Barr also announced in June its financing plans for a £41.5 million expansion project at its Milton Keynes plant - £15 million of which will be financed from new debt facilities.
Production at the site is expected to start in the third quarter of 2013.
Shares in AG Barr were down almost two per cent in early trading today.