Fever-Tree shares rise as US and international growth offsets UK slump
First-half pre-tax profit falls 15% as UK sales dip; US and rest-of-world revenue growth and Molson Coors partnership underpin outlook
Fever-Tree Drinks saw its shares jump after reporting interim results that showed a 15% fall in first-half pre-tax profit, with weaker domestic demand in the UK more than offset by sales growth in the US and the rest of the world.
The premium mixer maker reported adjusted revenues of £172.2 million for the six months, up 2% year on year, while pre-tax profit fell to £11.2 million from £13.2 million a year earlier. UK revenues declined 6% to £48.1 million, but US revenue rose 6% and rest-of-world sales increased 17%.
Fever-Tree attributed the UK downturn to a challenging on-trade environment. The company said solid off-trade demand was offset by what it described as "higher duty, wages and business rates driving pricing pressure which is disproportionately impacting the spirit and mixer categories." Chief Executive Tim Warrillow said the off-trade remained robust, with greater penetration across the portfolio: products beyond tonic accounted for 45% of group revenue.
The group pointed to its strategic partnership with Molson Coors as the key driver of its US progress. Molson Coors bought a stake in Fever-Tree and secured the exclusive right to sell, distribute and produce the brand in the US. Fever-Tree said a majority of products sold in the US are still produced in Britain after the company wound down a major US bottling arrangement ahead of the tie-up.
Fever-Tree disclosed that the partnership has exposed the joint profit and loss to a 10% tariff on UK exports to the US. In July the two companies agreed to split the costs of those tariffs equally. The company said it and Molson Coors are "jointly working hard to mitigate this impact ahead of the prospective onshoring of US production in the medium term," and that improvements in global supply chain and procurement should allow margins to recover over time.
The interim results left the company's cash position strengthened, with cash balances nearly doubling to £130 million, a change the firm said reflected both trading and inflows from the Molson Coors partnership. The board declared an interim dividend of 5.97p per share, up 2% on the prior year, and extended its share buyback programme by a further £30 million into next year.
Analysts and market commentators noted the mixed performance. Mark Crouch at eToro said the Molson Coors partnership was designed to scale the brand in the crucial US market and improve distribution and visibility, and that there were signs of promise in the latest update though momentum remained uneven.
Fever-Tree said the transition of the business to Molson Coors was progressing despite the complexity of such an arrangement. The company reported a "good start to the second half of the year across our regions" and reiterated that it remained comfortable with full-year market expectations.
The interim update highlights the geographic divergence in consumer demand and the immediate operational challenges of international expansion. While UK on-trade pressures have dented sales at home, Fever-Tree’s stronger performance in North America and other international markets underscores the company’s strategic emphasis on global growth and localised production plans to address tariff and margin pressures.
Investors will watch execution of the Molson Coors onshoring plan and further developments in cost mitigation and supply-chain efficiencies as indicators of whether Fever-Tree can convert its international momentum into sustained margin recovery and overall profit growth.