Fevertree shares slump as spiralling glass prices hit profits

Fevertree's shares tumbled in early trade after the update. Photo: Reuter/Neil Hall
Fevertree's shares tumbled in early trade after the update. Photo: Reuters/Neil Hall

Shares in Fevertree (FEVR.L) tumbled over 30% in early trading on Friday after the tonic maker issued a profit warning over rocketing glass prices.

The high-end tonics and sodas brand slashed its full year earnings forecast by a third, blaming labour and glass shortages and rising product costs as a result of soaring inflation.

It now expects profits of between £37.5m ($44.3m) and £45m, nearly half from previous estimates of between £63m and £66m.

The London-listed company pointed to worker shortages in the US, where it is building up its east coast production facility.

This meant the group had to ship more products from the UK, which pushed up its freight rates by 50% on key routes since the start of the year.

Company shares fell as much as 33%, down 28% at the time of writing.

CEO Tim Warrillow said he expected "to deliver good revenue growth for the full year", but noted that the logistical and cost headwinds "have significantly worsened in recent months" and were expected to "notably impact" full-year margins.

Fevertree said consumer demand "remains strong" and maintained its revenue guidance for the period of between £355m and £365m.

Revenue grew 14% in the first six months, compared with the same half a year ago, to £160.9m. The drinks mixer said demand in the US "remains very strong" in particular.

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Danni Hewson, financial analyst at AJ Bell, said: "Premium mixers maker Fevertree will be feeling very flat after its latest update. The problem it faces is a familiar one — costs are rising, supply chains are in a mess and that is putting pressure on profitability.

"The challenging backdrop has resulted in a big profit warning for the current financial year and there are plenty of worrying signs that may stick in shareholders’ throats.

"In theory, Fevertree should be in a reasonably good position to pass on higher costs. It is a premium brand and, relative to the cost of the accompanying alcohol, you’d think its customers might not worry too much about paying a bit more for their favourite mixer.

"The fact that Fevertree instead seems to be taking some of these extra costs on the chin at the expense of margins suggests its brand strength and market positioning might not have been as robust as previously thought.

"The return of the on-trade business in bars and restaurants has also not been enough to make up for a big drop in off-trade sales year-on-year."

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