By Phil Boeyen, ShareChat Business News Editor
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Monday 7th May 2001 |
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For the year ending June 2001 Frucor is predicting net profit will be around $11.4 million, down $6.1 million on previous estimates.
Forecast Ebitda is now pegged at $30 million, down from $38.2 million.
The company says the earnings downgrade stems from an anticipated $10 million Ebitda loss in the UK where V sales are likely to be significantly below prospectus forecast levels, which would have resulted in a break-even result.
Distribution concerns have dogged Frucor's attempts to the win over the UK market since it introduced its star-performing V energy drink there last year.
Frucor's stock, which was issued at $1.50 and risen at times towards $2.50, has essentially shadowed any good or bad news coming out of its European beach-head.
Although the company says the distribution drive for new accounts in the UK, which began in March this year, has progressed well, overall sales are obviously too far behind to have a positive impact on this year's figures.
However next year could well be a different story.
Listings figures show that between November last year and the beginning of this month the company has increased distribution in the organised-trade grocery market from 42% to 79% of outlets.
Penetration has also jumped in company-owned petrol stations from 47% to 80% and in convenience chains from 31% to 57%.
The product has also gained distribution in an extra 2,500 outlets in London in the past few months with another 1,000 due to be added in the next two months.
Frucor estimates by the start of a new advertising push in June it will have V in over 25,000 UK outlets.
That's more than four times the number it had in June a year ago when it embarked on an expensive advertising launch for the product but in hindsight did not have the distribution strength to support the campaign.
Frucor admits that while sales have more than doubled over the last three months, they are still significantly below plan but should be lifted by the new advertising strategy.
"Early signs of a change in the competitive landscape lead the board to be cautiously optimistic that continued targeted marketing investment behind the distribution that has been put in place will drive revenues and position V as the distinct number two behind Red Bull," the company says in a statement.
Despite the disappointing news about V the company is offering some good news from the Australian and New Zealand markets where Ebitda is projected to be $3 million ahead of forecast for the 2001 year.
The result is after adjusting for the one-off effect of a stock buyback from the acquisition of the Spring Valley distribution business in Australia which cost the company $3.5 million - more than double what it had anticipated.
In terms of growth for the current year Frucor says Ebitda for New Zealand is expected to be 15% while Australia will record a bumper 100%.
Looking to 2002 the company says the outlook is promising.
"New Zealand has performed consistently well.
"Australia, with only half the energy drink per capita consumption levels of New Zealand, continues to offer attractive levels of profitable growth as these levels increase, and V's strong market share, whilst impacted by new entrants, is growing.
"In the UK, a substantially improved profit result is anticipated against the loss of approximately $10 million that will result this year."
The latest profit downgrades have severely dented the Frucor share price in trading this morning, falling 36 cents to $1.87.
It seems Frucor investors, who had rerated the stock in recent weeks in the hopes of an early turnaround to the company's UK woes, will have to wait a while longer for that market to come to fruition.
Key will be whether the combined effect of better distribution and the June advertising blitz will achieve the much-needed improvement in sales.
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