Fevertree cuts profit outlook due to bad weather in Britain
Fevertree cuts profit outlook due to bad weather in Britain
- Fever-Tree now expects the company to earn £30 million to £36 million in core profits this year
- Rising gas prices have made the production of glass bottles much more expensive
- Half-year profits at the chic tonic maker fell by more than half to £10.2 million
Fevertree Drinks has cut its annual profit forecast after a sharp rise in glass costs and bad weather in Britain.
The higher-end soft drink maker now expects to make between £30 million and £36 million in core profits this year, compared to a previous forecast of £36 million to £42 million.
For the first six months of 2023, the London-based company reported profits fell by more than half to £10.2 million due to higher staff and overhead costs and other increased inflationary pressures.
Bottling problems: Fever-Tree warned in January that rising energy bills would result in around £20 million in extra glass production costs this year
Rising gas prices have made the production of glass bottles more expensive.
Fevertree, which sells around 80 percent of its products in glass bottles, warned in January that rising energy bills would add around £20 million in extra glass production costs this year.
Although the company has raised prices for customers, increased local U.S. production and increased supply chain resilience, first-half gross margins still fell 670 basis points to 30.7 percent.
Fevertree expects margins to improve as transatlantic freight rates decline and the full impact of recent price increases is recognised.
However, the company noted that demand in Britain was affected by “unusually bad weather” during the critical summer trading period, having already leveled off in the first half of the year.
By comparison, revenues rose 40 percent to £56.1 million in the United States thanks to a huge increase in new hospitality customers and retail sales.
In addition to a decent performance across Europe, this saw Fevertree’s total turnover increase by 9 percent to £175.6 million for the six months ending in June.
“While the vagaries of the British summer weather have impacted sales since the end of the period… the group still expects to deliver good growth into 2023,” said Fevertree CEO Tim Warrillow.
But slowing UK trade and the cost of a one-off stock buyback in Australia mean the company has cut its annual turnover forecast to between £380m and £390m.
After the update is Fevertree Drinks Shares Interest rates fell 0.6 per cent, or 7 cents, to £12.98 on Tuesday morning, but have risen by around 39 per cent in the past 12 months.
“It seems like the company can’t catch a break,” noted Russ Mould, investment director at trading platform AJ Bell.
He added: ‘Despite strong growth in the US, gaining market share in Britain and seeing progress in other parts of the world, Fevertree still seems to have as many critics as fans.
‘Admittedly, profits, margins and cash fell in the first half of the year, which suggests a business is under pressure. The challenge is to reverse that trend and get everything back on track.’