Nichols cautions of material impact from Middle East sugar tax

Soft drinks maker Nichols warned investors on Monday that 2020 full-year profits would be "materially impacted" by a new excise tax on non-carbonated sweetened drinks in both Saudi Arabia and the United Arab Emirates.

The tax will be applied to all non-carbonated drinks containing either natural or artificial sweeteners, including Nichols' flagship Vimto products.

As a result, unlike the UK soft drinks levy, product reformulation was not an option for the group.

The Aim-listed firm said that while it was difficult to estimate the future effect on sales volumes of the Vimto brand in the region at this point in time, the increased retail price would likely have a "negative impact from 2020".

To mitigate the impact, Nichols said that it had begun developing plans in collaboration with a long term in-market partner to maintain its market position.

Nichols added that the actual impact on sales across the Middle East would not be known until after Ramadan.

Elsewhere, Nichols expects 2019 full-year revenues to rise about 4% - a performance the group labelled as "pleasing" given a slowdown in Britain's soft drinks market and a challenging consumer environment.

Pre-tax profits for 2019 were projected to be in line with expectations.

As of 0820 GMT, Nichols shares had sunk 20% to 1,360p.