Britvic swallows inflated input prices

25 February 2011
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27 February 2011 | Lindsay Clark

Drinks firm Britvic has told the market it has been hit by higher-than-anticipated rises in raw material costs which will affect its profit margin.

In an update to the city, the manufacturer said the cost of input prices could increase by between 9 and 11 per cent this year. It had earlier estimated the rise could reach 6 per cent.

The statement said: “In particular, we have been adversely impacted by sharp recent increases in the price of PET [to make plastic bottles], steel and sugar.”

The company said the escalation in input costs came after the completion of this year's price negotiations which means it would not be able to recover or mitigate all the increases this year.

The statement said: “The input-cost inflation will impact the outcome for both the first half and full year, and means we do not now expect any operating-profit margin improvement in 2011, excluding the impact of France.” 

Britvic had expected a 5 per cent improvement in profit margin on 2010’s performance but no longer expects that result. However, the company remains confident it will boost its overall operating profit. The statement said: “Despite these headwinds, Britvic fully expects this year's operating profit performance to be materially ahead of the 53-week result reported for financial year 2010.”

Chief executive Paul Moody, said: “Since our last update to the market we have witnessed a rapid and unprecedented uplift in the cost of key raw materials. This has been driven by a shortage of supply to the market, where, for example, we have seen prices for PET, derived from oil, surge by around 20 per cent in the last month alone. We do, however, remain confident about the medium to long-term outlook for the business.”

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