C&C Group issues profit warning

Performance over the seasonally weak months of January and February is expected to continue this trend, C&C Group announced. Accordingly, the group anticipates overall operating profit for the full year to 28 February 2009 to be EUR 90 million.

In its last fiscal year, the company posted an operating profit of EUR 125 million.

C&C Group makes Magners cider in the U.K., Bulmers cider in the Republic of Ireland, as well as Tullamore Dew Irish whiskey and Carolans Irish cream.

In the third quarter (ended 30 November 2008), the company said that its cider revenue declined 19 percent, with sales in Britain down 24 percent and a 17 percent decline in the Republic of Ireland.

The company said the poor sales reflected very weak consumer demand, declining prices, more sales in retail outlets rather than higher-priced pubs and strong competition.

Still, Chief Executive John Dunsmore announced that he intends to add more ciders to C&C’s portfolio.

Mr Dunsmore, former head of Scottish & Newcastle, took over from CEO Maurice Pratt who was ousted in November last year, after C&C Group saw a spectacular reversal of fortune in its cider sales and a fall in profit.

At the end of January 2009, shares at C&C on the Irish Stock Exchange were down almost 70 percent year-on-year.

What gives the C&C saga an ironic twist is that in his previous role, Mr Dunsmore was at least partly responsible for C&C’s current problems. Once C&C had reinvigorated the U.K. cider category with Magners, S&N relaunched its own Bulmers brand, using the group’s superior distribution network and pricing power to take share from C&C Group.

C&C Group will issue a further trading update on 3 March 2009, when Mr Dunsmore will outline his expectations for 2009/10 and the implications this has for costs, asset values and dividends.

We will be all ears.