A.G. Barr Trading Update – What The Analysts Said

By Steve Wynne-Jones
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A.G. Barr Trading Update – What The Analysts Said

A.G. Barr, the maker of soft drink brand Irn-Bru, issued a trading update yesterday in which it said that it expects sales to drop by around 10% and profits to be down 20% in the first half of its financial year.

"Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance," commented Roger White, the group's CEO.

Here's how leading industry analysts viewed its performance:

Russ Mould, AJ Bell

“A profit warning from AG Barr shouldn’t have been a surprise given this summer’s extreme weather patterns, namely the horrible rain in June. If the sun isn’t shining then you’re less likely to want to quench your thirst with a cold drink from the shop.

“One can excuse the drinks company for not selling as many products in these conditions, however specific brand challenges with Rockstar and Rubicon are slightly concerning. Management appear to have addressed the issues with a mixture of new product development and recipe improvements, however we won’t see the benefit of these actions until later this year or early 2020.


“Irn-Bru has a reputation of being the drink of choice for many people nursing a hangover and so investors’ headache may not be long-lasting if they stick with the drinks manufacturer. One also has to think that the current sunny weather plays to AG Barr’s favour and so it may not be in a sticky patch for too long.”

Alex Smith, Shore Capital

"In our opinion, Barr's is a fine company, with an excellent portfolio of brands, world-class manufacturing facilities a strong balance sheet and high quality management. The business has these traits because of high quality management.

"In recent trading periods there has clearly been a much tougher financial outcome than management and we anticipated, which leads to lower guidance. As such, we expect the market to mark down the group's shares
once it digests this disappointing news.

"Whilst so, Barr is a cautious and straightforward group, that we believe will do the right things and deliver on its potential. We cannot be precise about the magnitude of any share price markdown, but feel that the balance between disappointment and fundamental virtues of a business operated in the right way merit consideration for the long-term investor."


Patrick Higgins, Goodbody

"[A.G. Barr's performance] was driven by a number of factors including: i) a return to more normalised higher pricing after the short-term volume focus in 2018, which particularly impacted the Irn-Bru brand; ii) specific brand challenges for Rockstar and Rubicon juices; and, iii) unfavourable summer weather conditions against a tough prior year comparative.

"We currently forecast c.3% EBIT growth for FY20 which we estimate we will reduce by c.23% following today’s announcement. This announcement underpins our cautious stance on the stock - we moved to SELL on A.G. Barr in April on the back of a high valuation (FY19 26x PE) and a tough prior year comparative where the Group delivered a strong performance driven by a number of potential one-offs (new product launches, CO2 shortage and exceptional summer weather)."

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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