AG Barr profits hit as margins squeezed

AG Barr said its performance had been affected by "extremely poor" weather since March

Profits at Irn-Bru producer AG Barr have taken a hit, with margins being squeezed by increased costs and brand investment.

The company announced it expected profits in the first six months of 2012 to be slightly lower than last year.

AG Barr said "extremely poor" weather since March had had a negative impact on market performance.

But it added it still anticipated a 4.5% year-on-year rise in sales to about £130m.

The Cumbernauld-based firm said it had continued to grow strongly ahead of the overall soft drinks market, which has seen volumes fall by 1% in the past six months.

It continued: "In recent weeks the weather has been extremely poor, with record levels of rainfall and we expect this will have had a further negative impact on market performance when the data is available for the remainder of June and July.

"Despite the difficult operating conditions, we have maintained our strategy of investing in brand equity and extending distribution."

AG Barr said its core brands had continued to respond well to that long-term approach.

It added: "Margins in the period have been impacted by increases to cost of goods, increased brand investment and adverse changes to our sales mix at brand, pack and channel level and as a result we expect profits in the first six months to be slightly below the prior year.

"We anticipate that margins will improve in the second half but that it is unlikely to offset the margin shortfalls of the first half."

The soft drinks maker also reported it was pressing ahead with a £41m production and warehouse operation in Milton Keynes after obtaining planning approval for the project.

Production is expected to start at the site in the third quarter of 2013.