eirmoney | Good Times For The C&C Group

Good Times For The C&C Group

Posted by Anil Bagra | 01 February 2010

Beverage manufacturer C&C Group PLC has announced its earnings outlook for the current year.

The drinks company expects operating profit to be in the range of €77 million to €82 million. The operating profit outlook is bright considering the economic recession in the country and challenging market environment in cider market.

C&C Group is primarily engaged in production, marketing and selling of cider, spirits and liqueurs in Ireland and the United Kingdom. The company’s cider brands include Bulmers and Magners, which are exported to the United Kingdom, the United States and Continental Europe.

Although the company expects to report a modest decline in cider volumes on a year on year basis, higher operating profit margin forecast reiterates strong positioning of C&C Group.

The company is focusing on its core business of cider production and marketing. Having sold its wine and spirits distribution business in February last year, C&C Group has made a number of acquisitions to strengthen its market standing. Early this year, the company completed the acquisition of Gaymer Cider Company from Constellation Brands. Gaymer was the United Kingdom cider business of the US based Constellation Brands. The deal, valued at GBP45 million in cash, transferred Gaymer’s UK warehousing and distribution rights to C&C Group apart from cider brands such as Blackthorn Cider, Gaymers Original and Pear Cider, Addlestones and Olde English Cider. The deal is expected to strengthen C&C Group’s position in the UK cider market. The United Kingdom cider market is a good growth model for the company with over 17 percent increase in December for the company. In comparison, C&C Group’s Ireland volumes fell 8 percent.

Apart from the Gaymer business, C&C Group also acquired the Irish and Scottish businesses of Anheuser-Busch InBev for GBP180 million. The company gained access to Wellpark Brewery and Tennent's Lager through the acquisition. The development became earnings accretive with returns exceeding C&C Group’s weighted average cost of capital in the first full financial year. Tennent’s full year profit is expected to be around €7 million this year. However, the earnings outlook provided by the C&C Group excludes Tennent’s results.

Separately, Citigroup released encouraging data for C&C Group’s Magners Original cider. The brand’s decline rate, which used to be between 20 percent to 50 percent, reduced to 13 percent and 7 percent in November and December 2009. This corresponds well with the price increases.

Following the earnings outlook announcement, the stock jumped 3 percent to €2.92 on Irish Stock Exchange. The stock has corrected about 50 percent in last four years from its peak of €5.70.