C&C Group is a manufacturer, marketer and distributor of branded cider, beer, wine and soft drinks. Its key brands include Magners (Bulmers in Ireland) cider, and Tennent’s lager. Headquarted in Dublin, its key markets are Ireland, the UK and the US, and it exports to more than 40 other countries.
In its trading update issued this morning, the company says its operating model will help mitigate some of the risks of Brexit, but the lack of visibility for the future is keeping it cautious on its outlook for the year.
Trading update: three months to May 31, 2016
Volume shipped by brand in the first quarter of 2016 shows improvement on last year, for key brands such as Bulmers (+9%), Magners GB (+24%) and exports (+24%).
Bulmers benefited from good weather in Ireland in March and May, which gave the cider category an early boost.
A recovery for Magners in Great Britain continued into the latest quarter, with the company adding that repackaging and its ‘Hold True’ campaign will continue the momentum.
Export is expected to deliver a 20% increase in volume for the year, thanks to organic growth and new distribution deals.
The UEFA European football championships in France have been good for trade in Ireland in June, leading C&C Group to predict a ‘decent month’ for its brands.
C&C Group says it remains cautious on its outlook for the year, given the UK’s decision to leave the EU.
“The result of the referendum in the UK brings with it uncertainty, volatility and a lack of visibility,” says the company. “Our Bulmers, Magners and Tennent’s brands are strong and connect with local customers and consumers in our core markets.
“We have a growing export business which is entirely unaffected by the UK decision to leave the EU and our conservative approach to currency risk covers most of our transaction exposure through natural hedging."
However, with almost half of profits denominated in sterling and reported in euros, C&C Group says it is exposed to the translation impact of a devalued pound. “At current levels, if sustained, currency movements have the potential to undo the earnings benefit from both cost reduction activity and the steady progress made in trading year-to-date.”
“While the longer-term economic implications of the UK referendum outcome are uncertain, the fundamentals of our brands and business model remain strong, supported by a robust balance sheet and cash conversion capability."
C&C Group is an Irish domiciled business with a dual listing on the Irish and London Stock Exchanges. “This, together with our focused operating model, helps to provide a degree of balance to the risks associated with the UK’s decision to leave the EU.”