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Irn-Bru maker A.G. Barr sinks on profit warning

by Gail Dent (2019-08-08)

By Tanishaa Nadkar and Noor Zainab Hussain

July 16 (Reuters) - British soft drinks maker A.G.Barr warned profits would fall by as much as fifth this year as higher prices and a cooler spring and summer than last year hit sales.

Shares in the company, best known for Scottish fizzy drink Irn-Bru, plunged as much as 33% on Tuesday to an eight month low of 601 pence.

Britain's soft drinks makers were hit last year by the introduction of a sugar tax. Unlike some rivals, A.G. Barr cut prices, while also reducing the level of sugar in its drinks.

This year, however, the firm - which has been selling soft drinks since 1875 - returned to higher prices, indoor playground equipment ( and said this had had a bigger impact on volumes than expected.

Sales were down about 10% in the first five months of the year, it said, adding there were also trading "challenges" around its Rockstar energy and Rubicon juice drinks.

"A nasty little profits warning this morning," said analyst Neil Wilson.

"Not so little in fact ... There is an element of strategy shift - from the heavy focus on volume last year and back to value now. But this only explains some of the trouble."

A.G.Barr's shares were down 26.99% at 0810 GMT, with rivals Britvic and Fevertree also lower.

Investec analysts cut their profit forecast for the year ending January 2020 to 36 million pounds ($45 million) from 46.6 million pounds. Profit before tax and exceptional items was 45.2 million pounds in the year ended January 2019.

As well as the sugar tax, Britain's soft drinks makers have been grappling with declining soda sales in developed markets as consumers become more health conscious.

Britain's tax on soft drinks came into force in April 2018 to tackle childhood obesity, and some officials are toying with levies on products with high salt and fat content too.

Boris Johnson, frontrunner to become Britain's next prime minister, has said he will launch a review of so-called sin taxes on products high in salt, fat and sugar if he wins the contest for leadership of the ruling Conservative Party.

A.G. Barr said it planned to launch three new Rockstar products at the end of the summer, and was improving the recipe for Rubicon, but would not see the benefits until later in the second half of the financial year.

"Despite our strong second half plan it is not expected that we will recover fully from the volume impact in the first 5 months of this year and the current trading we are experiencing, "it said.

"As a result, we expect our profit performance for the full year to decline versus the prior year by up to 20%."

($1 = 0.7992 pounds) (Reporting by Tanishaa Nadkar and Noor Zainab Hussain in Bengaluru; Editing by Patrick Graham and Mark Potter)