Britvic shares ‘best avoided’ for time being

Panmure Gordon’s Damien McNeela and Graham Jones penned a note on the UK-based soft drinks giant thi…

This was priced at 288p/share as we went to press, but was just above 330p on July 1, before the recall news hit on July 2 and the price plummeted.

McNeela and Jones were reacting to Britvic’s bleak Q3 2012 interim management statement (IMS), covering the trading period from April 16 to July 8 2012.

This showed overall group revenues down 7.6% to ₤300.1m (versus Q3 2011), and group volumes down 6.6%, while capital expenditure for 2012 had been cut from ₤72m (€92m) to ₤50m (€64m) and key investment programmes deferred until 2014 at the earliest.

Strong US progress

Pepsi's take-home market share grew in volume and value terms over Q3, but Britvic's GB carbonates revenues fell 3%; stills volumes plummeted 13.3% due to the recall, poor weather and an adverse channel mix.

Quarterly revenues in Ireland fell 11.1% as volumes dropped and prices fell due to more promotions and an adverse channel mix: grocery performing better than impulse, pub and club channels.

French revenues rose 4.3% although volumes fell 2.4%, while international revenues fell 1.3% in Q3, with "strong progress" for Fruit Shoot in the US cancelled out by the impact of the Fruit Shoot recall in Belgium and Holland.

Omnipresent, Olympic Coke...

According to Panmure Gordon's analysts, trading was unlikely to get any easier for Britvic in the near term as it moved into Q4.

“The operating environment in the UK is set to remain challenging with the high levels of promotional activity likely to continue. Coca-Cola as one of the main sponsors of the Olympic Games is likely to be omnipresent over the coming weeks and is also heavily promoting its products,” they wrote.

Britvic is Coca-Cola's main rival in Great Britain and Ireland as the second largest branded CSD player, since beyond its own brands (Robinsons, Tango, J20, Fruit Shoot) it also produces and sells PepsiCo brands Pepsi, 7UP and Mountain Dew Energy under exclusive agreements.

McNeela and Jones added: “Given the challenging environment in the UK and Ireland and the concerns that have been raised given the magnitude of the Fruit Shoot recall, we feel the shares are best avoided for the time being.”

Fruit Shoot in the dark?

Britvic CEO Paul Moody admitted today that Q3 had been “extremely challenging” for Britvic, blaming a weak consumer environment, poor weather and the Fruit Shoot and Fruit Shoot Hydro recall, which affected all the firm’s markets aside from the USA, Australia and Ireland.

“In the foreseeable future, our resources will be fully focused on re-establishing Fruit Shoot in the market as soon as possible,” Moody said.

He added: “Our other key priorities are to drive an improved performance from the strong brands across the group, ensure that we build and realise the value of our emerging US Fruit Shoot business and underpin the profitability of the company, with a strong emphasis on cash generation and rigorous cost management."

One bright spot for Britvic was strong progress for Fruit Shoot in the US, where it was unaffected by the recall,