Britvic hit by tough trading and rising costs

By Matthew Scuffham

LONDON (Reuters) - Soft drinks maker Britvic warned of tough trading conditions in both the take-home and licensed premises markets on Friday, and said raw material costs are expected to continue rising.

The news sent shares in the group, which have underperformed the FTSE All Shares Beverages Index by 13 percent this year, down 5 percent to 243-1/2 pence at 9:30 a.m.

Britvic, Britain's second-biggest soft drinks maker behind Coca Cola Enterprises, warned the soft drinks market is continuing to show "very low growth" in take-home and forecast conditions in the on-trade market will "remain challenging".

It expects raw material costs for the full year to rise by about 4.5 percent, marginally ahead of previous guidance, and anticipates further increases next year. Particular cost pressures relate to oil, bottling, and energy.

"We suspect the pricing environment is unlikely to improve and this may result in some margin pressure next year," said Citigroup analyst Philip Morrisey.

Britvic said it plans "at least partially" to offset the raw material increases through cost saving initiatives while, this year, they will be mitigated by interest charges being at the bottom end of market forecasts.

"Although we anticipate rising input and energy cost pressures, our strong focus on cost control allows us to remain confident about the delivery of earnings in line with market expectations for the current year," said Chief Executive Paul Moody.

Market expectations for pretax profit for the full year range between 66.8 and 71 million pounds, with the consensus at 69.1 million, according to a Reuters poll of six analysts.