Frucor lowers full-year targets

In the six months to the end of December Frucor recorded a tax-paid profit of $6.4 million, up 40% on the previous year's $4.6 million.

However during the period the company bought the Spring Valley sales and distribution network in Australia, and it says the cost of buying back the inventory has more than doubled to $3.5 million from the previously forecast figure of $1.7 million.

"This adjustment will have the impact of reducing revenues for the year. In effect Australian sales for the financial year will be the equivalent of around 46 weeks," the company says.

Although the adjustment is a one off and the company says the underlying business is performing strongly, it has lowered its full year revenue forecast to $250 million - down $5 million from last month's estimate.

Full year net profit after tax is expected to be $17.5 million, down from the $20.4 million forecast in the company's prospectus.

Profit margins also fell during the first half compared with the previous year, reflecting the increased money being spent on marketing, which jumped by 149% to $19.6 million.

Despite the lower than expected first half estimates Frucor says net profit after tax should rise in the second half of the year on the back of a combination of higher revenues and lower marketing investment.

"New Zealand should continue to see double-digit growth while the recent acquisition of Spring Valley sales and distribution infrastructure in Australia will have positive impact on profitability in the medium term."

Frucor says the New Zealand market performed well in the first half of the year, lifting revenues by 24% to $82.4 million compared with the previous year. International sales grew 230% to $38.3 million and now account for a third of total revenue.

Although first-half profit was around $500,000 below forecast due to lower than expected UK sales, this is picked to improve in the second half.

The company says it has continued to increase distribution there and has recently secured Asda - one of the UK's largest supermarket chains - as a customer listing.

In terms of products, the 'New Age Beverages' category, which includes V, accounted for most of Frucor's first-half revenue growth, however its 'Other Beverages' category also grew revenue strongly.

Included in this category are H2Go, Pepsi and the company's new Mizone flavoured water sports drink.

Frucor is paying a 4 cents per share interim dividend.

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