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Fever-Tree shares tumble 27% after firm downgrades yearly profit forecast again

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Fever-Tree shares tumble 27% after glass and labour shortages cause drinks maker to slash profit forecast by a 3rd

  • Fever-Tree has lowered its full-year underlying earnings range to £37.5-£45m 
  • Its shares became the highest faller on the AIM All-Share Index this morning
  • They fell 27.3 per cent to 871.5p, having declined by two-thirds in past six months
  • The firm said logistics and value issues had turn into more acute in recent weeks
  • It has kept its revenue guidance because of a powerful recovery in on-trade sales 

Fever-Tree has lowered its annual profit outlook for the second time this yr, sending its share price plummeting in early trading on Friday.

The premium drinks mixer maker, famous for its tonic waters and ginger ales, revealed that logistics and value issues had turn into rather more acute over the past eight weeks due largely to severe shortages of labour and glass.

Since it has struggled to rent latest employees in america, the group said that production has needed to be scaled up in Britain to satisfy demand, thereby leaving it more exposed to higher sea freight rates.

Problems: Fever-Tree revealed that logistics and value issues had turn into rather more acute over the past eight weeks due largely to severe shortages of labour and glass

As well as, the firm observed revenue being impacted by a ‘severely restricted’ supply of glass. Costs are forecast to rise by double-digit percentage levels within the second half of the yr.

Though it believes a few of these extra costs might be ‘transitory in nature,’ the group expects them to chop into gross margins alongside foreign exchange headwinds and modest limited sales mix.

As a consequence, the corporate has now downgraded its full-year underlying earnings range to between £37.5million and £45million, in comparison with a previous depressed forecast of £63-£66million.

Following this announcement, Fevertree Drinks shares became the highest faller on the AIM All-Share Index this morning, diving 27.3 per cent to 871.5p, which suggests their value has declined by around two-thirds previously six months.

Fever-Tree co-founder and chief executive Tim Warrilow acknowledged that provide chain and value impediments have ‘significantly worsened in recent months.’

But he added that the corporate was working ‘more closely than ever with suppliers throughout our supply chain, to mitigate the transitory headwinds and at the identical time ensure we will satisfy the strong demand we’re seeing in our growth regions.’ 

Nonetheless, the London-based business has maintained its annual revenue outlook as loosening lockdown restrictions led to a large recovery in sales across hospitality establishments.

For much of the primary half of 2021, pubs, bars and restaurants were either shut or forced to operate at limited capability, causing a major hit to Fever-Tree’s trade and the broader hospitality sector.

Through the equivalent period this yr, though, the corporate observed ‘on-trade’ sales jumped ahead of pre-pandemic volumes within the US, where it recently overtook Scwheppes to turn into the country’s leading tonic water brand.

Demand from on-trade outlets also soared within the UK, climbing by 73 per cent from last yr even with the impact resulting from the Omicron variant, and offsetting a downturn in purchases by ‘off-trade’ outlets, reminiscent of off-licences and supermarkets.

As well as, Fever-Tree expanded its leading market share position in Australia and Canada, and achieved sales growth of 27 per cent in Europe on the back of healthy performances from major territories in Southern Europe. 

Warrilow said: ‘Despite the present challenges of the volatile logistical and value environment, we proceed to make good progress across our regions. 

‘The strong and growing consumer demand for the brand, our exciting pipeline of innovation, and the growing interest in long-mixed drinks, gives us more confidence than ever within the long-term opportunity.’

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