ii view: cider maker C&C flags robust year-end demand

A stable of drink brands and distribution contracts for industry giants. Buy, sell, or hold?

Trading update to 28 February

ii round-up:

Magners, Bulmers and Tennent’s maker C&C Group (LSE:CCR) today flagged a return to more robust  trading following the UK and Irish government pandemic restrictions during December.

The FTSE 250 company delivered 68% of drink volumes to its on-trade outlets such as pubs and bars in February compared to February 2020 when the pandemic started. Momentum was building as outlets continued to re-open. That’s up from 64% of volumes back in January. 

C&C Group shares rose by more than 9% in UK trading, leaving them up by more than 45% since pandemic market lows in March 2020. Year to date, C&C Group shares are down around 12%, similar to rival beverage makers Diageo (LSE:DGE) and Britvic (LSE:BVIC). The FTSE 250 index is down around 11% in 2022 so far. 

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The Dublin headquartered company expects to report full-year 2022 operating profit of between €45 million and €47 million. That’s better than last year’s loss of €59.6 million, although still down on the pre-pandemic outcome of €118.6 million.

Rising costs are expected to be at least partly countered by savings of €18 million made over the year plus recent price increases.

C&C has manufacturing operations in County Tipperary, Ireland; Glasgow, Scotland; and Vermont in the US. Operating under the Matthew Clark, Bibendum, Tennent’s and C&C Gleeson brands, it supplies over 24,000 outlets in the UK and Ireland and also distributes for other major beverage companies such as Anheuser-Busch InBev (EURONEXT:ABI) – owner of the Budweiser brand.

Full-year results to the end of February are pencilled in for 17 May. 

ii view:

C&C Group’s other group brands include Heverlee, Menabrea, Five Lamps and Orchard Pig. Its makes and runs a portfolio of craft cider brands in North America and exports its Magners and Tennent’s brands to over 60 countries worldwide. It also owns a minority investment in the Admiral Taverns tenanted pub group.  

For investors, pandemic outlook uncertainty remains worthy of consideration. The dividend payment is still halted and factors outside of its control such as the weather and the timing of sporting events also need to be remembered. Health issues and minimum unit pricing in Scotland should also not be forgotten. 

More favourably, its brand portfolio is well known, a focus on lowering net debt is ongoing, while savings are helping to counter rising costs. In all, and while some caution remains sensible, tentative signs of an emergence from the pandemic may leave the shares on the watch list of higher risk investors.  

Positives: 

• Strong brand names
• Exclusive Irish distribution of Budweiser and Bud Light

Negatives:

• Less than 5% of sales from outside the UK and Ireland
• Halted dividend payment

The average rating of stock market analysts:

Buy