C&C drinks volumes are up but remains cautious about Brexit

Irish drinks manufacturer and distributor C&C on Thursday reported a rise in drink volumes but was cautious of Brexit uncertainty as they could be affected by the weakened pound.

In the company’s trading update in the three months to 31 May, it said its volume shipped by brand was a “considerable improvement” compared to last year.

Its brands Bulmers was up 9%, Tennant’s in Ireland up 4%, Tennant’s in the UK was up 5%, Magners in the UK was up 24% and Export was also up 24%.

The company also said despite a “solid” start to the year it remains cautious due to the “uncertainty, volatility and a lack of visibility” of the Leave result of the European Union (EU) referendum on the 24 June. But it maintained that it was supported by a robust balance sheet and cash conversion capability

“Our Bulmers, Magners and Tennent’s brands are strong and connect with local customers and consumers in our core markets. We have a growing export business which is entirely unaffected by the UK decision to leave the EU and our conservative approach to currency risk covers most of our transaction exposure through natural hedging.

“However, with almost 50% of profits denominated in sterling and reported in euros, C&C is exposed to the translation impact of a devalued Pound. At current levels, if sustained, currency movements have the potential to undo the earnings benefit from both cost reduction activity and the steady progress made in trading year-to-date.

“We are an Irish domiciled business with a dual listing on the Irish and London stock exchanges. This together with our focused operating model helps to provide a degree of balance to the risks associated with the UK’s decision to leave the EU”.

The company said good weather in March and May boosted cider sales for Bulmers. Haverlee and Clonmel 1650, part of its boutique beer range, also experienced an increase in volume of 67% and 65% respectively in on-trade in Northern Ireland.

The company said that its portfolio in Northern Ireland and its investment on on-trade through loan finance contributed to this rise.

The company’s volume in Scotland fared better this quarter than last year according to C&C. The company said volumes in Heverlee were up 31% and Menabrea up 123% in on-trade.

The Dublin based company said exports are on track to rise by 20% for the year through organic growth and new distribution deals. It said it should benefit from a rise in tourism in Spain and the launch of a new Tennent’s premium range in Italy.

However in the US, the company said the cider category was negative. In December 2015 C&C signed a distribution deal with Pabst, the US’ largest privately held brewer to sell its cider.

The company said Pabst had made good progress in integrating, consolidating and rebranding C&C’s cinder business and it will wait and see if the changes would be successful and if it would recover market share in the second half of the 2017 financial year.

On the supply side of the business, the company said it had the consolidated all cider and Irish production into its Clonmel site in advance and remain on track to deliver the cost savings targeted this year.

Shares in C&C rose 1.29% to 3.53p at 1632 BST.