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A.G. Barr first-half profit up

Source: Reuters - Tue 29th Sep 2009

Scottish drinks maker A.G. Barr on Tuesday shrugged off a decline in the UK soft drinks market, posting a 20 percent increase in first-half pretax profit and expressing confidence about meeting market expectations for the full year.

A.G. Barr, best known for its bright orange Irn Bru drink, also raised its interim dividend by about 8 percent to 6.25 pence.

Shares of AG Barr, which have gained about 50 percent in the past 12 months, were up 3.8 percent at 778 pence at 11:34 a.m. on the London Stock Exchange.

The Cumbernauld-based company said it benefited from better weather and its acquisition of the fruit-drink brand Rubicon last year.

"We got a little bit of help from a good period of weather in late June, but it hasn't really been the barbeque summer that everybody predicted here. So, it's the new business coming in from the acquisition and fundamental growth in our core existing brands" Chief Executive Roger White told Reuters.

Analysts on average expect the company to post a pretax profit of 25.0 million pounds on revenue of 190.4 million pounds for the year ending January 31, 2010, according to Reuters Estimates.

"We think the analysts are in the right ballpark and that's where we are. We are well positioned to meet our expectations for the year and that probably says it all" White said.

However, the group said it expected continued volatility in material costs and strong competition in the market place. 

The CEO said he expected comparative sales growth in the second half to be more challenging than that in the first half.

For the six months ended August 1, pretax profit rose to 13.5 million pounds from 11.3 million pounds last year.

Revenue grew 27 percent to 104.7 million pounds, while like-for-like sales, stripping out the acquisition of Rubicon, increased 11.5 percent.

"This is a very commendable achievement against a challenging trading environment, which saw the UK soft drinks market decline by 1 percent in both volume and value terms, implying some material market share gains" said analyst Greg Feehely of Altium Securities.

Feehely, who has a "buy" rating on the stock, raised the price target on the stock to 830 pence from 725 pence.

The company, which also bottles Strathmore water and Tizer, said it would continue to look at acquisitions "whether big or small" but was not specifically looking to expand into new geographies.

"We are taking the Rubicon brand more into Europe, but the focus for our core business really is in the UK" CEO White said.

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