Irn-Bru maker AG Barr reports fizzing profits

Irn-Bru maker AG Barr reported a surge in profits for last year helped by a "buoyant" soft drinks market, but warned that the business would be hit by rising commodity prices and weak consumer sentiment. The Cumbernauld-based company, which also makes Tizer, Barr, St Clements and Rubicon fruit drinks, said its pre-tax profit jumped by 13% to £31.6m in the year to 29 January as sales increased by 10.4% to £224.4m. AG Barr's chief executive, Roger White, added that sales in the first eight weeks of the new financial year "are ahead of the same period last year". The group's shares rose by nearly 4%. However, the company said it would be hit this year by the rising prices of commodities such as oil and sugar. "The challenges of cost inflation which almost all manufacturers are facing are creating headwinds," a spokesman said. White added: "The soft drinks sector will face tough comparative trading across 2011, as well as further cost volatility and general economic uncertainty. However, we face these challenging conditions with good momentum." AG Barr attributed last year's rise in profit to "proactive management of costs" and sales growth, with revenue growth outperforming the UK soft drinks industry as a whole. The so-called "take-home" soft drinks market – which accounts for the vast majority of AG Barr's sales – increased by 7% in 2010. By contrast, the "on-premise" market declined last year. "This channel accounts for only a small percentage of our total business and its impact was minimal," a spokesman said. The company also benefited from the rising popularity of the Rubicon range of fruit drinks, which have almost doubled since AG Barr bought the business in August 2008 and now account for a fifth of the group's sales. AG Barr recently launched Rubicon Mango Light and has introduced new flavours across its portfolio, such as Barr Orangeade. However, the company said it was reining in product developments because cautious consumers are tending to stick with brands they "know and trust". White added: "A lot of the growth's been driven by our biggest brand, which is Irn-Bru. Irn-Bru still will be our long-term investment in consumer marketing, sponsorship and our brand-building activities." Greg Feehely, an analyst at Altium Securities, said: "Barr has continued to make good progress across both of its key trading segments – carbonates and still – by focusing on the core brands of Irn-Bru, Barr and Rubicon. "The business has also benefited from significant investment in both operations and the supply chain which has, and will continue, to offset some of the substantial input cost inflation the industry is facing." The group was set up in 1875, when founder Robert Barr began selling "aerated waters" drinks in Falkirk. The Irn-Bru brand was launched in 1901. AG Barr's marketing campaigns last year included giving away 250,000 Irn-Bru beach towels to Scottish consumers over the summer. The company is recommending a final dividend of 18.66p to give a total for the year of 25.41p a share, a 10% increase on 2009. AG Barr's shares increased by 46p, or 3.98%, to close at £12.01.