Fevertree lowers profit outlook on rising glass costs
- Fever-Tree now expects to make between £30m and £36m in core profits this year
- The increase in gas prices has made the manufacturing of glass bottles very expensive.
- The posh tonic maker’s half-year profits plummeted by more than half to £10.2m.
Fevertree Drinks has reduced its annual profit forecast following rising glass costs and bad weather in the UK.
The luxury soft drinks maker now expects to make between £30m and £36m in core profits this year, compared with a previous forecast of £36m to £42m.
For the first six months of 2023, the London-based company reported that its profits more than halved to £10.2 million due to rising staff and overhead costs and other elevated inflationary pressures.
Bottling woes: Fever-Tree warned in January that soaring energy bills would lead to around £20m in extra glass manufacturing costs this year.
Rising gas prices have made the manufacturing of glass bottles more expensive.
Fevertree, which sells around 80 per cent of its products in glass bottles, warned in January that soaring energy bills would lead to around £20m in extra glass manufacturing costs this year.
Although the company has raised prices for customers, increased local production in the U.S. and boosted supply chain resilience, first-half gross margins still declined by 670 basis points to 30.7 percent. hundred.
Fevertree expects margins to improve as transatlantic freight rates reduce and the full impact of recent price increases is recognized.
However, the company noted that demand in the UK had been hit by “unusually bad weather” during the critical summer trading period, having already plateaued in the first half of the year.
In comparison, revenue rose 40 per cent to £56.1 million in the US thanks to a bumper rise in new hospitality customers and retail sales.
As well as a decent performance across Europe, this helped Fevertree’s overall turnover rise 9 per cent to £175.6m for the six months to June.
“While the vagaries of the British summer weather have impacted sales since the end of the period… the group still expects to achieve good growth in the remainder of 2023,” said Fevertree chief executive Tim Warrillow.
But slowing trade in the UK and the cost of a one-off inventory buyback in Australia mean the company has reduced its annual revenue outlook to between £380 million and £390 million.
After the update, Fevertree Drinks Stock They fell 0.6 per cent, or 7p, to £12.98 on Tuesday morning, but have risen about 39 per cent in the last 12 months.
“The business can’t seem to catch a break,” said Russ Mold, chief investment officer at trading platform AJ Bell.
He added: “Despite achieving strong growth in the US, gaining market share in the UK and seeing progress in other parts of the world, Fevertree still appears to have as many critics as it does fans.
‘It’s true that profits, margins and cash fell in the first half, suggesting the business is under pressure. Your challenge is to reverse that trend and get everything back on track.”