Irn-Bru maker AG Barr’s share price plummeted this morning after it warned of a sharp drop in full-year profits amid worse-than-expected trading.
The Scottish-based fizzy drinks maker warned that profits for the full-year would slump by 20 per cent, after predicting that the firm is unlikely “to recover fully from the volume impact in the first five months of this year and the current trading we are experiencing”.
Shares tumbled 30 per cent to 603p in early morning trading.
Citing “brand challenges” in its Rockstar energy and Rubicon juice drinks, as well as disappointing spring and early summer weather, the firm also said revenue for the 26 weeks to 27 July would fall by roughly 10 per cent to around £123m.
It is also anticipated there will be some exceptional costs incurred in the current financial year as it takes action to regain momentum, the firm added.
Boss Roger White today described the period as “a challenging start to the year”.
He said: “Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance.
Neil Wilson, chief market analyst at Markets.com, said the brand challenges were “a surprising development and undoubtedly will disappoint shareholders”.
“Relying on the Scottish weather for sales is not much of a strategy,” he said. “There is an element of strategy shift – from the heavy focus on volume last year and back to value now.
“But this only explains some of the trouble. It’s not been such a good summer in Scotland and northern England versus last year and management are pointing to ‘brand challenges’ for Rubicon and Rockstar.”
The slow start to the year comes after a tricky 12 months for A.G. Barr, which has been battled major industry changes including a soft drinks tax and CO2 shortages.
Analysts at Shore Capital expect the market to mark down the group’s shares once it digests today’s news.
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However, they added: “Barr is a cautious and straightforward group, that we believe will do the right things and deliver on its potential.
“We cannot be precise about the magnitude of any share price markdown, but feel that the balance between disappointment and fundamental virtues of a business operated in the right way merit consideration for the long-term investor.”