Britvic’s £114M Brazilian buyout to double earnings
The drinks firm, which manufactures brands such as Robinsons and Pepsi, will leverage Ebba’s status as the country’s leading supplier of liquid concentrates to boost its own revenue and double Ebba’s by 2020, according to Britvic ceo Simon Litherland.
Brazil has the sixth largest soft drinks market, with sales growing 14% year-on-year, he added. Britvic will also enter the Brazilian market in time for the 2016 Olympics in Rio.
Ebba reported profits of £8.84M during 2014 and a total revenue of £86M.
“The acquisition of Ebba represents a unique opportunity to acquire a high quality business in a substantial soft drinks market, with exciting future growth potential,” Litherland said.
‘Building new markets’
Britvic in figures:
- £114M acquisition of Ebba
- Q3 revenue up 1% to £322.3M
- GB revenue down 0.8%
- French revenue up 7.1%
“Ebba operates in categories where Britvic has proven capability of building new markets, accelerating innovation and establishing brand leadership.”
Britvic had been in discussions with Ebba, which was a family-owned firm, for some time before the acquisition in a bid to assess the value of the business and its prospects for growth, he added.
However, some City analysts have warned that Britvic’s acquisition of Ebba would fail to divert investor’s attention away from its “lacklustre” Q3 results.
The company saw its UK revenues decline by 0.8% as a result of price fluctuations, it said in a Q3 statement for the 12 weeks to July 5.
“Great British revenue declined primarily due to negative price/mix,” Britvic said. “This was against a strong performance last year, when Q3 revenue increased by over 10%.”
Revenues in Ireland and France rose by 0.7% and 7.1% respectively, which was achieved by an increase in volume sales. Group revenue was up just 1% to £322.3M.
‘Back into revenue growth’
Litherland added: “I am pleased to see the business back into revenue growth this quarter, following the investment we have made in our brands and innovation launches in each of our markets.
Brazil’s soft drinks market:
- 14% year-on-year growth
- Sixth largest soft drinks market
- Ebba has a turnover of £86M
“We have also executed some fantastic marketing campaigns, including Robinson’s 80 year association with Wimbledon.”
Meanwhile, City analyst N+1 Singer issued a 'sell' recommendation against AG Barr, following “worse than feared” half one (H1) results.
AG Barr, which was considering a sale to Britvic in 2013, posted H1 sales down 5% to £128M, which was worse than expected, N+1 Singer analyst Sahill Shan said.
“The H2 hill has become much steeper post today’s news,” he said. “We fundamentally like AG Barr, but forecast risk, low growth and valuation influences as to stick with our ‘sell’.”
