November 29, 2017 / 7:35 AM / 2 years ago

Britvic core earnings rise; says well placed to take on sugar tax

(Reuters) - Tight cost controls helped Robinsons squash maker Britvic post a 5 percent rise in annual core earnings, and the company said it was well placed to deal with uncertainties stemming from Britain’s impending sugar tax.

Bottles of soft drinks made by drinks company Britvic sit on a conveyor belt at Britvic's bottling plant in London March 25, 2009. REUTERS/Luke MacGregor

Shares of the UK bottler of Pepsi, 7UP and Mountain Dew Energy rose 7 percent to a record after the company also said average prices for its soft drinks rose 1.6 percent in the year.

Britain is set to implement a levy on makers of sugary drinks, a move advocated by health campaigners arguing that fizzy drinks are a source of empty calories. But the industry is opposing the tax, saying that it will not work and will disproportionately hurt poorer people.

The tax is due to come into force in April 2018, giving soft drinks makers such as Britvic and Coca-Cola European Partners time to reduce sugar in their products.

Britvic, which also makes J2O and Tango drinks, has already been cutting sugar content in drinks sold in Britain, but analysts have said the company will need to raise prices to cushion the impact from the higher taxes.

Chief Executive Simon Litherland played down the fears.

“Ninety-four percent of our own brands will be unaffected by the sugar levy. Pepsi and 7UP are the prime brands that can be affected but they also have low sugar offers,” he said.

Litherland said the company raised prices to offset the impact of a weaker pound and higher raw material costs, and added that the company also reduced costs by 8 million pounds in the year.

“Adjusted EBITDA (was) driven by successful management of cost inflation through revenue management and cost control,” Jefferies analysts wrote in a note.

Britvic, whose main markets are Britain, Ireland and France, said adjusted earnings before interest, taxes and amortization (EBITA) rose to 195.5 million pounds.

Annual profit after tax fell 2.5 percent to 111.6 million pounds.

The company’s shares were up 6.6 percent at 808 pence at 1028 GMT, making the stock one of the top performers on the FTSE Midcap index.

Reporting by Hanna Paul and Rahul B in Bengaluru; Editing by Saumyadeb Chakrabarty

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