Profits sweet but sales slide as drinks firm keeps its fizz
Irn-Bru maker AG Barr says it will continue to grow despite uncertainties
THE chief executive of Irn-Bru maker AG Barr has said the company will continue to grow and develop its business amidst further constitutional uncertainty and “let the politicians worry about the other stuff”.
Roger White was speaking as the soft drinks manufacturer announced it was cutting 90 jobs in its commercial, supply chain and central functions. It is thought about 55 of these cuts will be made at its Cumbernauld site.
Barr also hit out at the UK Government’s “punitive and unnecessary” sugar tax, saying such a levy would be “complex, expensive and difficult to implement”.
Barr has been re-formulating its portfolio to reduce the sugar content and has also introduced sugar-free Irn-Bru Extra in a bid to ensure two thirds of its volume sales are low or no sugar by 2018.
Mr White said the company was “bang on track” to meet this target, but added the Irn-Bru brand extension had been in development for two years, and its introduction was not connected to the sugar tax.
AG Barr lifted profits for the last six months to £17 million in spite of a 2.8 per cent fall in sales to £125m in a challenging environment.
The company warned that input costs would rise as a result of the Brexit vote, estimating a £3m to £4m impact in 2017 because it buys dollar and euro-denominated materials to produce its products.
Barr said it was taking action to offset this cost where possible though Mr White said Brexit had no influence over the job cuts.
With regards to the possibility of a second Scottish independence referendum, Mr White said: “Any level of uncertainty, most businesses don’t like.
“From our perspective we keep going, selling our products, developing and investing in our business. We’ll let the politicians worry about the other stuff.”
Mr White said poor weather in June and July had negatively impacted sales, but better conditions since the reporting period ended on July 31 would be reflected in the year-end results.
Deflationary pricing led soft drinks category sales to fall 0.7 per cent, but Mr White said that was coming to an end.
“In common with vast majority of consumer businesses we will start to see inflationary pressure which will undoubtedly over time work its way up the supply chain, which will move into retail in due course, I am sure,” he said.
International revenue was up 16 per cent and Mr White said he expected this momentum to continue: “It is still only four per cent [of overall revenue] but our aspiration is to grow that considerably.”
Capital expenditure during the period amounted to £5.3m, down from £7.9m as the firm significantly invested in assets, infrastructure, processes and systems ahead of yesterday’s job cuts announcement, which is the final part of a three-year business improvement plan called Fit for the Future.
The redundancies will cost about £4m, but lead to £3m in annual savings.
Mr White said. “[We have] a strong asset base, [our] brand equities are in good health and the balance sheet is strong.
“There are strong growth engines in funkin [mixers]and our international [expansion], and our innovation programme is coming through, so our objective is to make sure we are capable of facing whatever uncertainties and challenges come with changing consumer behaviour, but we’re facing that with a strong offering.”