Shares of Merseyside-based Vimto and soft drinks firm Nichols plc see-sawed after it said the recent escalation of hostilities in Yemen resulted in its supply route to Yemeni customers being blockaded.
” … the current conflict in the Yemen coupled with some reported slowing in the Saudi economy indicates that sales to the Middle East region in the year ahead are likely to be less than previously anticipated,” said Nichols.
“As a result, management currently expects low single digit percentage profit growth in 2018 in comparison to the current year.”
In a trading update for the year ending December 31, 2017, Nichols said that while sales are still expected to be ahead of the prior year, the problems in Yemen mean management currently expects adjusted group profit before tax to be in line with the prior year.
Nichols’ other brands include Feel Good, Starslush, ICEE, Levi Roots and Sunkist.
“We anticipate group sales for the year ending 31 December 2017 to continue the strong trend reported at the half year,” said Nichols.
“This sales performance is again being delivered from both our UK and international business.
“UK sales of the Vimto brand are 9.0% ahead of the prior year (as at November 2017).
“This performance is significantly ahead of the UK market growth of 2.3% (Nielsen year to date 2 December 2017).
“As previously reported, this strong sales performance helps mitigate the margin impact from the increased input costs affecting the industry.
“Internationally, our business in Africa has again delivered an excellent performance with full year revenues anticipated to be in excess of 20% ahead of the strong prior year comparatives.”
In its outlook, Nichols said: “For the year ahead, we are confident that the strong sales trend will continue in the UK with the Vimto brand being supported by a new marketing campaign launching in the spring.
“In addition, we are well prepared for the introduction of the Sugar Levy with 100% of the Vimto and Feel Good brands portfolio already below the levy threshold.
“In our international business, we anticipate the strong growth trend in Africa to continue in 2018.
“However, the current conflict in the Yemen coupled with some reported slowing in the Saudi economy indicates that sales to the Middle East region in the year ahead are likely to be less than previously anticipated.
“As a result, management currently expects low single digit percentage profit growth in 2018 in comparison to the current year.
“In summary, our diversified business model is expected to deliver continued sales growth into 2018 and the group remains highly profitable.
“In addition, our strong balance sheet and cash generation supports ongoing investment in our growth strategy and our ability to sustain a progressive dividend policy.”