First downturn in 10 years expected at Invergordon: Distiller's cautious forecast rekindles speculation that rival may launch a second bid

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CITY analysts are predicting that Invergordon Distillers will suffer its first profits fall for 10 years in 1993, rekindling speculation that Whyte & Mackay may soon mount another takeover bid.

Whyte, the Scotch whisky company owned by American brands, holds a 41.3 per cent stake in Invergordon - almost all of it the legacy of its failed pounds 350m bid in 1991.

The belief that Whyte will rebid is strongly reflected in Invergordon's share price. One analyst said the true price of the shares, down 1p to 269p yesterday, was probably around 225p.

Invergordon, which yesterday announced results for 1992, said it had had no contact with Whyte, which said its view remained unchanged. 'We are keeping our options open for now and into the future,' it said.

Those who believe that Whyte could strike again this year base their view on the cautious statement about future prospects that accompanied the flat set of results for 1992.

Profits before tax moved ahead by slightly less than 1 per cent to pounds 32.5m. The result, compared with the 11 per cent improvement made in the first half, prompted many analysts to downgrade forecasts.

The City, however, was heartened by the underlying financial strength of the company. Cash flow was strong, enabling borrowings to be cut by pounds 8.5m to pounds 25m, or from 73 per cent to 42 per cent of shareholders' funds.

A final dividend of 4.2p lifts the total payout by 8 per cent to 7p, covered 2.5 times by earnings per share of 17.5p.

The damage to Invergordon's strong profits growth record over the previous eight years occurred very late in 1992. Export bulk orders were delayed, as buyers anticipated price cuts in January, traditionally a month for increases.

And Chris Greig, managing director, warned: 'The difficult conditions of the last few months have continued into 1993, and the immediate prospect is for margins to remain under pressure as the industry seeks to protect volumes.'

While the City reckons that profits this year will fall slightly, the consensus among analysts is that the company's prospects for 1994 look better. Invergordon, itself, believes that prices for grain whisky - the mainstay of its business - will firm before those for single malts do.

The company argues that the surplus of grain whisky is small and that malt producers will resist the temptation to dump at cheap prices, preferring instead to roll over stocks for later years. Total industry output of grain whisky fell for the second year running in 1992, by 6 per cent to 217 million litres of alcohol. Malt production declined by 11 per cent to 166.5 million litres.

Invergordon is largely geared towards the market for own-label blended Scotch whiskies, traditionally comprising a mixture of two- thirds grain and one-third malt. The company also owns four malt distilleries and will cut back production, already down to 60 per cent of capacity, by another 15 per cent this year.

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