Macdonald posts expected profit slump

MACDONALD Martin Distilleries' profits warning, made two months ago was borne out yesterday with pre- tax profits for the year to 31 March slumping by 50 per cent to pounds 4.3m.

Earnings per share dropped from 41.88p to 20.38p but the dividend is being held at 8.8p. Neil McKerrow, managing director, said the company suffered from extreme pricing pressure, particularly in the blended whisky sector. Expected intra-industry sales failed to materialise.

He added that any improvement in trading in 1993/94 would be offset by a pounds 700,000 write-off on excess capacity at its two distilleries.

The Glenmorangie distillery is working at one-third of capacity and Glen Moray at 60 per cent. Staff numbers were reduced by 5 per cent during the year, and capital expenditure was reduced by pounds 800,000 to pounds 1.2m.

The balance sheet showed a pounds 2.4m rise in shareholders' funds, mainly due to an increase in stocks from pounds 38.1m to pounds 39.6m. Borrowings rose slightly from pounds 12.4m to pounds 13.1m.

While there were signs of economic green shoots, Mr McKerrow said trading conditions remained fragile.

The industry was generally lumbered with surplus stocks of both grain and malt whiskies. Consequently, wholesale prices had fallen sharply. Worldwide industry sales of Scotch have fallen by 1 per cent in the past year.

Macdonald's turnover in 1992/93 dropped from pounds 30m to pounds 24.2m, primarily due to a 33 per cent fall in volume shipments of bulk whisky to 137,000 cases.

The biggest falls in sales were recorded in the UK and Australia. Duty-free sales were hit by the fall in world travel.

Sterling's devaluation provided no benefit for the company, which said that all the gains flowed to third parties, particularly retailers.

The company's problem in bulk whisky was further compounded by a 48 per cent fall in the sales value.

Profits from its Glenmorangie and Glen Moray branded single malts were only slightly lower. The sales value of Glenmorangie rose by 9 per cent, but profit gains were cancelled out by increased marketing costs.

Despite the industry's problems, Macdonald said it remained confident about long-term prospects for malt whisky and that its premium brand positioning will materialise.