Liberum Capital has downgraded its rating for Britvic PLC (LON:BVIC) to ‘Hold’ from ‘Buy’, highlighting a “softer consumer environment” for the drinks maker
The broker said the downgrade, which accompanied a 50p drop in its target price to 1,000p from 1,050p, was also partly a response to volatility in the J2O and Robinsons maker’s shares, which have recently begun to level off after jumping 15% to 1,051p in the past two months.
Liberum's analysts also cut 2% from their full-year profit forecast for Britvic to £221mln for 2020, anticipating a softer guidance statement because of “challenging markets and cost pressures” for the mixers group, which earlier this year announced that revenues shrank 1.5% in the third quarter due to deteriorating markets in France.
They said that with the likes of Carrefour, Heineken and CCEP all reporting downturns in France, “it's reasonable to assume that sales in France for Britvic declines 10% in 2H'19”.
However, the analysts also noted that the drinks maker is near the end of its business capability programme to improve efficiency at its UK factories with greater capacity and automated warehouses, which offers hope to the broker with scope for “£2-3mln of cost savings earlier than expected”.
They called Britvic “a much more formidable competitor” with savings expected to help “offset any top-line weakness” from France, allowing the company to meet current year expectations.
Britvic shares were down 1% to 977.5p in early trading on Friday.