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Fever Tree shares plunge 28% after the company cuts full-year earnings guidance again

Fever Tree shares plunge 28% after glass and labor shortages cause the beverage maker to cut its earnings guidance by a third

  • Fever-Tree has cut its full-year underlying profit range to £37.5m-45m
  • The company said logistics and cost issues have become more acute in recent weeks
  • Thanks to a strong rebound in on-trade sales, the company has maintained its sales guidance

Fever-Tree cut its full-year earnings outlook for the second time this year, sending its stock down more than a quarter on Friday.

The drink mixer maker famous for its tonic waters and ginger ales said logistics and cost issues have become much more acute over the past eight weeks, largely due to severe labor and glass shortages.

With the United States finding it difficult to hire new staff, the group said production in the UK had to be increased to meet demand, leaving it more exposed to higher sea freight rates.

Issues: Fever-Tree revealed that logistics and cost issues had become much more acute over the past eight weeks, largely due to a serious shortage of labor and glass

Additionally, the company observed that revenue was impacted by a “severely constrained” glass supply. Cost increases in the double-digit percentage range are forecast for the second half of the year.

While it anticipates some of these additional costs will be “temporary in nature,” the group expects them to reduce gross margins along with foreign exchange headwinds and a modestly constrained revenue mix.

As a result, the company has now downgraded its full-year underlying profit range to between £37.5m and £45m, down from a previous low guidance of £63m and £66m.

After this announcement shares in Fiebertree Drinks became the top performer in the AIM All-Share Index on Friday, falling 27.7 percent to 866.5 pence, meaning its value is down around two-thirds since mid-January.

Tim Warrilow, co-founder and CEO of Fever-Tree, acknowledged that supply chain and cost barriers have “deteriorated significantly over the past few months.”

However, he added that the company was “working more closely than ever with suppliers across our supply chain to mitigate temporary headwinds while ensuring we can meet the strong demand we are seeing in our growth regions.”

Nonetheless, the London-based company has maintained its annual sales guidance as the easing of lockdown restrictions prompted a massive rebound in sales across all hospitality establishments.

For much of the first half of 2021, pubs, bars and restaurants were either closed or forced to operate at limited capacity, significantly impacting Fever-Tree’s trade and the hospitality sector as a whole.

During the same period this year, however, the company observed retail sales in the US, where it recently overtook Scwheppes to become the country’s leading tonic water brand, exceeding pre-pandemic volumes.

Demand from retail outlets in the UK also jumped, up 73 per cent year-on-year, even adjusting for the impact of the Omicron variant, and offsetting a drop in purchases from retail outlets such as off-licenses and supermarkets.

In addition, Fever-Tree expanded its leading market share position in Australia and Canada and achieved 27 percent sales growth in Europe on the back of healthy performances in key areas in Southern Europe.

Warrilow said: “Despite the current challenges of the volatile logistics and cost environment, we continue to make good progress in our regions.

‘Strong and growing consumer demand for the brand, our exciting innovation pipeline and growing interest in long-mix beverages give us more confidence than ever about the long-term opportunity.’

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Fever Tree shares plunge 28% after the company cuts full-year earnings guidance again

Source link Fever Tree shares plunge 28% after the company cuts full-year earnings guidance again

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