C&C cautious on Magners cider sales

By Andras Gergely Reuters - Friday, May 9 09:49 am

DUBLIN (Reuters) - C&C Group is struggling to improve sales of Magners cider in the UK after poor weather and low consumer confidence caused a 41 percent drop in 2007/08 earnings, and hit trade this spring.

C&C, which also makes Irish Mist liqueur, said cider sales in Britain would return to growth in 2008 if summer weather was better than last year.

"We are being sensibly cautious in terms of outlook for performance this year, particularly so because of the fragile state of consumer confidence," Chief Executive Maurice Pratt told reporters.

Adjusted basic earnings per share (EPS) for the 12 months to the end of February fell to 32.2 cents, compared with the 29.7 cent average of 14 analysts' forecasts on Reuters Estimates for EPS before exceptional items.

C&C, which has repeatedly warned wet weather last summer and weak Christmas sales would hit full-year earnings, said Magners volume fell 15 percent in 2007/08, while volume for its Irish cider brand Bulmers dropped 4 percent. Revenue fell 8.1 percent to 679 million euros (348 million pounds).

It expects revenue growth from the second quarter as it launches marketing initiatives such as the introduction of Magners Draught in Britain, and due to last year's low base.

"For the full year, the group expects modest overall revenue growth and some improvement in operating margins," it said, adding foreign exchange hedging would substantially insulate it from the weaker sterling versus the euro.

Analysts at NCB Stockbrokers said they expected C&C to reverse its recent slide in cider market share in Britain.

Barry Gallagher, an analyst at brokerage Davy, said he expected 3 percent volume growth for cider this year, though weather and heightened competition remained key variables.

"With rationalisation effected, new key executive appointments made in Britain, draught Magners set to launch and further investment in trade marketing intended, Magners' growth momentum in Britain may be reignited," Gallagher said.

Shares in C&C traded 2.3 percent lower by 9:00 a.m. British time at 4.62 euros, while the wider Irish market was down 0.9 percent.

(Editing by Will Waterman, Quentin Webb and David Hulmes)

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