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Irn Bru and Rubicon manufacturer AG Barr (BAG) recorded a 5% increase in sales for the first half of 2018, buoyed by favourable hot weather at the end of the period.
The soft drinks manufacturer benefitted from warmer weather to help recover from the impact of poor weather at the start of the quarter, and “volatile” soft drink market backdrop as a result of April’s sugar levy.
The Scottish drinks supplier increased sales 5% for the 26 weeks to 28 July to around £136m, up from £129.8m in 2017 – which itself was 8.8% up on the prior year.
Weather improvements and pricing benefits from the sugar levy introduced in April, helped quicken growth towards the end of the period.
Sales in the UK soft drinks market improved 4.5% in the half-year to 1 July, with volumes up 1.4%.
The Irn-Bru brand has “continued positive growth”, the company added, with “strong growth” for its Irn-Bru XTRA brand.
AG Barr has “invested in established brands and innovation”, it said, with “further significant growth” for its Rubicon Spring brand and its Rubicon Street Drinks launch.
Partnership brands, San Benedetto and Bundaberg, have made “encouraging early progress”, while mixer Funkin is performing “well across channels” it said.
The company’s full year sales expectations remain unchanged.
Despite “considerable volatility” in the market place, AG Barr delivered “strong top-line growth”, commented CEO Roger White
“We have delivered strong top-line growth in a period of considerable marketplace volatility and change,” he said.
“Our growth across core brands is especially encouraging and our strong second half brand and sales development plans give us confidence that we can deliver against our profit expectations.”
The shares are flat in early trading at 677p on the news.
Morning update
Recent dry weather forced up fruit and vegetable prices last month, with food inflation expected to continue according to BRC (British Retail Consortium) and Nielsen data.
The BRC and Nielsen monthly shop price index revealed a 1.6% increase in food prices year-on-year.
The price of fresh food increased 1.2% year-on-year, up from 0.8% in June, as crops were impacted by a long spring and recent dry conditions.
Ambient food products also surged, moving from a 1.6% price increase last month to a 2.2% price growth in July.
Overall however, shop prices remained in deflation, edging to a 0.3% decrease on the same period last year, slightly up from June’s 0.5% decrease.
Despite surging food prices, non-food items saw their greatest deflation for eight months, with prices 1.4% down year-on-year.
“Food inflation increased in July, with vegetables and fruit affected in particular thanks to the effects of a cold spring and the recent prolonged dry period,” commented Helen Dickinson, chief executive of the BRC.
“This month also saw non-food items reach their lowest level of deflation since December 2017.
“We expect this period of food price inflation to continue in coming months as despite global oil, food and commodities prices shrinking recently, the hot, dry conditions we have seen across the northern hemisphere means the pressure on prices will continue for some time to come.”
Mike Watkins, head of retailer and business insight, at Nielsen, said: “The slight increase in food inflation over the early summer has been offset by increased demand for food and drink as the result of the heatwave and incremental spend around the World Cup.
“Looking ahead, with weather related changes in commodity markets anticipated, fluctuating currencies and wavering consumer spending, retailers still need to minimise price increases, as the underlying trading conditions across the retail industry remain challenging.”
Packaging giant Smurfit Kappa Group saw sales increase 5%, driven by growth in Europe.
The paper and packaging supplier increased sales to E4.4bn, driven by 7% growth in the European market, consisting of underlying growth and acquisitions.
Pre-tax profits rose 70% to E416m, with the group’s operating profit before exceptional items up 48% for the six months 30 June.
“SKG is pleased to deliver significant improvement against our key performance measures,” said group CEO Tony Smurfit.
“With an increase in EBITDA of over 27% to €724 million and an EBITDA margin of 16.4% our first half performance reflects the quality of our assets, geographic reach and market positions.
“As we start the second half, business conditions remain strong. We are excited about our prospects and we continue to expect our 2018 EBITDA to be materially better than 2017.”
The FTSE 100 steeply dropped in early trading with caution surrounding an slowdown in the UK manufacturing sector, the index falling 0.7% to 7,696pts.
The early risers in the sector include Hotel Chocolat (HOTC), up 1.5% to 345p, Glanbia (GLB), up 1.3% to 14.2p, and Fevertree Drinks (FEVR), up 1.2% to 3,487p.
The early fallers this morning include McBride (MCB), down 4.2% to 135p, Greencore (GNC), down 2.5% to 172.8p, Greggs (GRG), down 2.2% to 1,029p and BAT (BATS), down 1.2% to 4,150p.
Yesterday in the city
The FTSE 100 jumped up 0.6% to 7,748pts after reports that the US and China have renewed trade talks.
High street baker Greggs (GRG) rocketed 9.6% to 1,054p, as it posted a fairly positive outlook for the rest of the year.
Risers yesterday included Treatt, up 4.4% to 470p, Nichols (NICL), up 2.4% to 1,465p and Finsbury Food Group, up 2.1% to 119p.
Greencore (GNC) dropped 5.2% to 177.3p, after the sandwich giant recorded 0.5% growth in its third quarter trading update.
Another company to falter following a results announcement yesterday was Just Eat (JE.), which fell 6.3% to 793p, as a results of doubts regarding the cost of global expansion.
Other fallers yesterday included McColl’s (MCLS), down 3.8% to 150p, Glanbia (GLB), down 2.8% to 14.7p and Fevertree Drinks (FEVR), down 2.6% to 3,445p.
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