Burn Stewart overcomes whisky pricing pressures: Sharp volume rises not reflected in turnover

Click to follow
The Independent Online
MORE evidence of the pricing pressures facing the Scotch whisky industry was produced yesterday by Burn Stewart Distillers.

Heavy pressure on wholesale prices in the UK is coming from the large supermarket groups, while overseas buyers are pushing for lower prices on bulk purchases.

Bill Thornton, chairman of Burn, reporting on the six months to 31 December said that volume sales of bulk and cased whiskies improved but average selling prices were lower both in the UK and in export markets.

His remarks echoed those made recently by Macallan Glenlivet and Invergordon Distillers.

Despite the pricing pressures, Burn increased profits before tax from pounds 4m to pounds 4.3m thanks to a halved pounds 700,000 finance charge, reflecting a reduction in borrowings from the proceeds of the company's flotation in 1991.

There is an inaugural interim dividend of 1.7p.

Hard financial proof of the pricing squeeze can be gleaned from the turnover and volume sales figures.

Turnover rose marginally from pounds 19.4m to pounds 20.2m, while volume sales of bulk whisky rose by 17.8 per cent and of cased whiskies by 11.1 per cent.

Average selling prices of bulk sales, however, fell by 7.9 per cent, while the fall in cased was less marked at 1.6 per cent.

But, unlike Macallan and Invergordon, the company will not be drastically reducing production at its malt distillery.

Instead, cuts will be made on the purchasing side - possibly by as much as 20 per cent this year.

'The pressure on pricing will remain a major issue this year. Although trading in January and February was slow, volume has recovered in March and is expected to improve in the coming months,' Mr Thornton said.

Burn has boosted its stocks from pounds 41.8m to pounds 54.4m, which will affect interest charges in the second half. 'The move will give us access to greater flexibility of the types of whisky we can sell in '93, '94 and '95,' he said.

The move has also increased gearing from 36 to 64 per cent of shareholders' funds of pounds 35.2m.