Stock Spirits hit hard by Polish woes

Problems in the Polish market have seen profits tumble by -77% at drinks group Stock Spirits, which released its half-year results today.

The branded spirits producer, which derives around 60% of its business from Poland, saw revenue for the six months to 30 June slide from €137.7 million over the same period last year to €108m. There was an even more dramatic effect on profits, which collapsed from €23.2m in 2014 to just €5.2m.

The results were largely created by Stock Spirits’ “extremely weak” performance in its first quarter, further compounding a -14% sales slide in 2014. The company blamed a 15% tax hike in Poland at the start of 2014, which has seen consumption fall and aggressive price wars among spirit producers in this market.

Attributing the group’s “very poor” first quarter to these factors, Stock Spirits’ CEO Chris Heath sought to reassure investors that the situation appeared to be improving.

“Trading in Poland improved significantly in the second quarter, but not enough to fully offset the poor first quarter,” he reported. “All other markets have traded in line with our expectations. Therefore as expected, the group’s overall results for the first half of the year 2015 have been disappointing.”

Although the group cited a -2.7% volume decline in Poland’s total vodka market sales during the first six months of 2015, it highlighted a slowdown in this shrinkage, which stood at -3.6% during the same period a year ago.

Heath stressed the company’s commitment to achieving value and margin “rather than chasing uneconomic volume market share”, as he outlined a focus on new product development, portfolio premiumisation and ensuring effective “customer and channel management”.

While acknowledging “risks facing the business from continuing aggressive competitor pricing and erratic customer ordering patterns”, he nevertheless predicted an improved performance by the group over the rest of 2015, forecasting full year pre-tax profits “within the range of €60m to €68m”.

In conclusion, said Heath, “Having come through a very difficult period, we have put the building blocks in place to ensure that the group is well placed to capitalise on the opportunities available in the Central and Eastern European region”.