Irn-Bru maker AG Barr (BAG) expects sales to rise 7.5% to approximately £277m in the year to 27 January 2018, helping the shares fizz up 2% to 655p.
This is better than analysts had expected. For example, Investec analyst Nicola Mallard previously forecast 6.8% sales growth.
The forthcoming sugar tax in April could have less impact on AG Barr than expected. It believes 99% of its portfolio will contain less than 5g of sugars per 100ml before the tax comes into power.
That means only 1% of its products will be subject to a sugar tax versus previous expectations of 10%.
Last month, there were reports of fans stockpiling Irn-Bru ahead of a re-jigged recipe. Contrary to these reports, the company reports a positive response to the new recipe.
‘The reformulated version of regular Irn-Bru was launched in early January post extensive research and testing to ensure there was an excellent taste match to the ‘original’ product. It remains early days since the launch, but the company states the consumer response to date has been encouraging,’ says stockbroker Shore Capital.
‘We take a lot of heart from these early signals, understanding as we do the strong emotional connection that the product has, most particularly in the group’s Scottish heartlands.’
AG Barr continues to outperform the UK soft drinks market and increase its market share, according to the latest IRI Marketplace data.
Cost pressures from the weaker pound have been a big theme for the business in 2017 but it remains confident of delivering profit growth for the year.
‘The trading update states that Barr has not been immune either, although we had factored in some margin pressure,’ adds Shore Capital.
‘The stronger than expected growth in sales, however, provides us with reassurance that our modest profit growth expectation is a reasonable assumption. Again, whilst it is management’s job to meet the vagaries of the market, the work that Barr has undertaken in recent years to remain fit for purpose is yielding benefits, to the leadership’s credit.’
