(Reuters) -Fevertree Drinks trimmed its annual profit forecast on Tuesday after first-half earnings halved on higher glass costs and a wet summer in the UK, sending shares in the British tonic maker down as much as 7%.
The company has been grappling with spiralling costs and shortages of glass bottles in Britain forcing it to implement price increases to protect margins and ramp up glass production in the U.S.
“Whilst we are experiencing significant margin dilution in the current year, most notably due to materially elevated glass costs, we are confident that we will see margin improvement in the second half,” the company said in a statement.
It said it expects a 2023 core profit of around 30-36 million pounds ($38-$45 million), down from an earlier forecast of 36-42 million, due to a wet summer in the UK and impact from inventory buyback in Australia.
Analysts had forecast a profit of about 38.4 million pounds, according to a company-compiled consensus.
Shares in Fevertree pared losses to trade down about 1% at 1,290 pence at 0817 GMT.
The company posted a 54% fall in its adjusted core profit to 10.2 million pounds on sales up 9% for the half year ended June 30.
“Margins have taken a big hit from ballooning glass manufacturing costs, which the firm hasn’t fully been able to pass on through price increases,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Consumer products giants including Unilever, Coca-Cola and Reckitt have shown they can pass on costs to customers to protect margins helped by brand power.
Founded in 2003, Fevertree has emerged as a strong contender to Coca-Cola’s Schweppes in the tonic market.
($1 = 0.7990 pounds)
(Reporting by Aatrayee Chatterjee and Radhika Anilkumar in Bengaluru; editing by Subhranshu Sahu and Jason Neely)
