Whisky firm hit
Profits slide at Macallan distiller Edrington
Scott McCroskie: good outcome (pic: Terry Murden)
Edrington, the Famous Grouse and Macallan whisky producer, posted a “material decline” in revenue and profit for the year.
But it said this reflects a better-than-expected performance in an operating environment that included Brexit, US tariffs and the effects of the global pandemic.
Profit before tax fell 21% to £178.4m and core revenue from Edrington branded products (at constant currency) came in 15% lower at £576.2m for the year to the end of March.
Net debt stands at £375.5m, an improvement of £76.3m vs prior year
Edrington’s top brand, The Macallan, suffered a significant decline in contribution driven by a sharp contraction in global travel retail, closures of bars and restaurants and wholesaler destocking in the USA.
However, consumer demand for the world’s most valuable Single Malt Scotch Whisky remained strong and the business pivoted to accelerate progress in new channels such as ecommerce.
The brand saw strong performances in China, South-East Asia and Russia.
It was a “challenging year” for other single malts, Highland Park and The Glenrothes, reflecting a competitive category, loss of sales in travel retail and the impact of tariffs in the USA.
The Famous Grouse proved resilient in its core markets in northern and eastern Europe and extended its lead as Scotland’s and the UK’s favourite whisky.
Brugal, Edrington’s premium rum, generated “outstanding growth” in its home market of the Dominican Republic, where the company was able to maintain supply and visibility for consumers.
Scott McCroskie, chief executive, said: “In last year’s annual report, I anticipated a decline in profitability after several years of consistent growth as a result of the Coronavirus pandemic and tariffs on single malt scotch whisky in the USA, our largest market.
“Our reported results confirm that this was indeed the case, although I believe that the relatively modest declines represent a good outcome in the circumstances.
“The reduction in net sales reflects pandemic-related restrictions as well as trade destocking primarily in the USA.
“Our decision to maintain relatively high levels of brand investment meant that core contribution reduced by more than net sales, although that was mitigated by a range of cost reduction measures.
“Our free cash flow and net debt both improved as a result of these measures, and I am pleased that the company remained well within its lending limits and banking covenant tests.
“I am proud of the way our people have responded to the pandemic, and of the results we have achieved. The fundamentals of our business are strong, and our brands are in good health.
“Although the pandemic will continue to impact our business for some time to come, I am encouraged by the growth in sales we have seen in the first quarter of this financial year.
“I am confident we can navigate the challenges we face and that we are ready to progress from a position of strength.”
Edrington has taken a significant minority stake in No.3 London Dry Gin, the ultra-premium gin owned by Berry Bros. & Rudd, a family-owned and private business. Edrington has had a long and successful partnership with BB&R, dating back nearly 100 years.
The agreement, which is expected to conclude imminently, will see No. 3 distributed across Edrington-owned distribution markets including the USA, APAC, Global Travel Retail and the Nordics.
Berry Bros. & Rudd will continue to distribute in markets including the UK, Germany, Italy, Spain, Australia, and Belgium. The companies are not disclosing the financial terms of the agreement.
Mr McCroskie added: “I am really pleased that Edrington will enter into a strategic partnership with our long-term partners Berry Bros. & Rudd on the No. 3 London Dry Gin brand.
No. 3 complements the existing Edrington portfolio of exceptional ultra-premium spirits adding an award-winning and a beautifully elegant, classic London Dry Gin to our line-up of Single Malt Scotch Whisky, Rum, American Whiskey, Blended Scotch Whisky, and Tequila.”