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July 11, 2012 10:42 pm
Shares in Britvic fell over 13 per cent after the FTSE 250 maker of Robinsons squash delivered a profit warning on the back of a fruit juice recall.
The company said the recent product recall of its Fruit Shoot children’s drinks brand would wipe between £15m and £25m off earnings before interest and tax this year and next – up from its £1m-£5m estimate earlier this month.
Britvic said that the product recall, sparked by safety fears over bottle caps that the company feared could become choking hazards, would reduce 2013 financial year earnings by £5m-£7m.
Paul Moody, Britvic’s chief executive, blamed the relative lack of suitable replacement bottle caps for the increased losses.
“It’s the relative lack of available caps which has impacted on our pre-tax profit projections as we can’t go back to full supply of the juices immediately,” he said.
Analysts’ consensus earnings estimates for 2012 before the recall were about £135m.
In a statement Britvic said it would begin to resupply Fruit Shoot with new, safer bottle caps in six weeks and supplies would be up to historic levels
of demand within six months.
Wayne Browne, an analyst at Canaccord Genuity, said the new losses projection raised further questions about how much the recall would eventually
cost and its impact on cash flow.
“Originally the company said the recall would cost much less so it raises questions about how the process is being handled, the impact on cash flow and how the dividend will be funded,” he said. “Management will ultimately be judged about how they handle this – they have got off to a poor start.”
The news comes after Britvic warned in May that trading was being adversely affected by the inclement weather – particularly drinks such as J2O juice which rely heavily on pub sales, where they are sold as an alternative to fizzy drinks.
Last year the company’s share price suffered after the launch of Robinsons double concentrate led to some pricing confusion among consumers and volume declines.
However, in May the company said trading was being boosted by buoyant consumer demand for carbonated drinks such as Pepsi – which Britvic produces
on licence in the UK
and Ireland – along with 7UP and Mountain Dew Energy.
Shares in Britvic closed down 13.4 per cent yesterday at 260.1p
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