McBride trading statement points to poorer results as sales slide and costs rise

By Simon Pitman

- Last updated on GMT

Related tags Stock market Material London stock exchange Europe

Private label personal care specialist McBride says weak retail sales in Europe and increased expenses are likely to impact the company’s fourth quarter results.

The company says that turnover for the fourth quarter, ending 30 June 2010, is likely to be down 3 per cent on the corresponding period last year, which is likely to lead to full year trading being flat.

The downturn in fourth quarter sales reflects the fact that the company has continued promotional activity on branded goods in the troubled UK market, while sales across Europe have remained weak.

Meanwhile, increased costs are also likely to impact the current quarter, the company said, underlining the fact that the price it pays for raw materials has increased by 4 per cent in the period between December 2009 and June of this year.

Markets remain volatile

“We believe our markets will remain volatile and there remains a significant risk that our material costs will rise by a further 4 – 6 per cent during the next financial year,” ​the company said in the pre-close trading statement.

The announcement, which was made yesterday, sent the company’s share prices on the London Stock Exchange tumbling by 22 per cent to 139.80p per share at close of business.

However, despite the rise in costs experienced over the last six months, the company believes that year-end debt will be in line with its forecasts.

Full year results buoyed by stronger first half

The full year results reflect the fact that in the first six months of the financial year the company had profited from the trend for European consumers to opt for less expensive private label personal care brands.

The company also says it is expecting cost saving initiatives to save £4m (€4.5m) a year, helping to absorb some of the future raw material price increases.

McBride supplies both personal care and household products to some of the largest retailers in Europe, including Tesco and Carrefour, and has been concentrating its expansion strategy on continental Europe in recent years.

Comparisons difficult against last year's strong results

During the 2009 – 2010 financial year it reported a 13 per cent increase in sales to ₤792.4m, of which 4 per cent was down to organic growth and the rest currency translations, the company said.

Strong sales helped push operating profit up 28 per cent to ₤27.4m, which, when adjusted for exceptional items came in at ₤36.2m for the year.

The positive performance was attributed to both an increased demand for private label products and a continued focus on product development.

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