Fevertree Drinks Plc (AIM:FEVR) shares crashed nearly 30% lower after a profit warning cautioned over soaring costs that are eating into margins.
The mixer maker has stuck to its production guidance of £355mln to £365mln for 2022, but, downgraded it margin forecasts to 33% from 36%.
It told investors that the past eight weeks have seen “rapid shift in operational and cost backdrop”.
Specifically, Fevertree said labour shortages impacted its production ramp-up in the United States and a shortage of glass has become severely restricted, whilst at the same time industry-wide cost pressures have increased.
For the first six months, revenue for the half was reported at £160.9mln, up 14% from £141.8mln in the same period last year.
“The business is working on a large number of initiatives, and more closely than ever with suppliers throughout our supply chain, to mitigate the transitory headwinds and at the same time ensure we can satisfy the strong demand we are seeing in our growth regions,” said chief executive Tim Warrillow.
“Despite the current challenges of the volatile logistical and cost environment, we continue to make good progress across our regions.”
In London, Fevertree shares fell 325p or 27.1% to trade at 873.5p in Friday morning’s deals.
Stockbroker Liberum noted that the downgraded margin guidance is now even further away from its prior expectations of 39% (based on last year’s performance), but, it retained a ‘buy’ recommendation for the share.
“Logistics disruption and inflationary cost pressures continue to hurt and likely to do so for longer than we had expected but the US East Coast bottling plant is gradually ramping up and it is engaging with suppliers on various cost initiatives which will help mitigate the inflationary pressure but maybe more so next year than this one,” Liberum analyst Wayne Brown said in a note.
Despite retaining a bullish rating, the broker lowered its target to 1,100p.