12 Sep, 2023 09:59 12 Sep, 2023 10:34

Fevertree cites elevated glass costs as H1 profits drop; cuts outlook

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Tonic maker Fevertree Drinks cut its full-year outlook on Tuesday as it reported a fall in first-half profits, with margins dented by "materially elevated" glass costs.

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In the six months to 30 June, revenue grew 6% from the same period a year earlier to £175.6m, with a particularly strong performance in the US, which saw 40% growth year-on-year.

However, adjusted earnings before interest, tax, depreciation and amortisation slumped 53.5% to £10.2m. Fevertree said that as expected, gross margins were impacted by inflationary cost pressure, "most notably the effect of materially elevated glass pricing in 2023". These headwinds were partially offset by mitigating actions, including pricing actions across regions.

Pre-tax profit slid 92% to £1.4m.

While it expects to deliver continued good growth in FY23, namely in the US, Fevertree said sales since the period-end have been hit by unseasonably poor weather in the UK, "which has subdued the wider category over the key summer trading period".

That, along with the impact of the inventory buyback in Australia, means the group now expects to deliver FY23 revenue of between £380m and £390m, down from previous guidance of £390m to £405m. EBITDA is expected to be between £30m and £36m, down from previous guidance of £36m to £42m.

Chief executive Tim Warrillow said: "We had a standout performance in the US where the brand continues to go from strength to strength, extending our leadership position in the tonic and ginger beer categories. This reflects how well established the brand is becoming in the world's largest premium spirit market.

"In the UK, despite the challenging macro-economic conditions, we ended the first half with our highest ever value share of 45%, which is over 50% higher than our nearest competitor. I have been hugely encouraged by the response to our new innovation, specifically our range of cocktail mixers and adult soft drinks, as shown by the significant and growing listings across both channels. Our European business is growing in depth and breadth and the recent step changes we have made in our route to market across Australia, Canada and Japan reflect the growing potential we see in our Rest of World region."