Results for AG Barr PLC (LSE:BAG), the owner of soft drink brands such as Irn-Bru and Rubicon, next week will show how much profits have been diluted by increased costs and its recent acquisitions, with the shares having remained pretty much flat so far in 2023.
Revenue grew by 15% in the 52 weeks to 29 January 2023, the Scottish company revealed in a trading update, but inflationary pressure plus the purchase of sports drink company Boost and oat milk producer MOMA were said to have squeezed the company’s profit margins.
The FTSE 250 constituent claimed it was “taking positive measures” to lessen the damages caused by increased costs.
Based in Cumbernauld, near Glasgow, Barr has been using cost-cutting measures such as price hikes to mitigate the risks.
“This should help to deliver a solid profit performance next week, with many analysts forecasting a pre-tax profit of almost £43mln,” said analyst Aarin Chiekrie at Hargreaves Lansdown.
The drinks firm may also be susceptible to revenue troubles going forward as the company’s sales are almost exclusively from the UK.
“While revenues have been robust so far, this lack of diversification is a big risk. There will be a close eye on whether there are any early signs of weakening demand in the region,” stated Chiekrie.
Barr’s trading update also noted that it was expecting this year a hurdle in the form of the Scottish deposit return scheme, so investors may be keen to see management’s preparations for potentially weakened consumer spending.