July 9, 2008

Edrington Sees Profits Rise By 10per Cent Highland Park and Macallan Are Toast of Whisky Group


SCOTCH whisky distiller Edrington Group yesterday announced a near-10per cent rise in underlying annual profits - boosted by strong growth in sales of its Highland Park and Macallan single malts - but flagged tougher economic times ahead and likely price rises triggered by surging costs.

In his review of the results, chief executive Ian Curle highlights the Glasgow-based distiller's awareness of its social responsibilities as an alcoholic beverage company.

His comments come at a time when the SNP administration at Holyrood is embarking upon a high-profile clampdown on Scotland's drinking habits.

Edrington, which employs 810 people and is based at Great Western Road on the slopes of Drumchapel, said its underlying pre-tax profits rose by 9.7per cent to GBP75.6m in the year to March 31.

Its turnover rose 4.7per cent to GBP291.5m. Sales of Highland Park jumped by more than 20per cent by value to make it Edrington's fastestgrowing brand, and The Macallan enjoyed an undisclosed double- digit-percentage advance.

Curle says The Famous Grouse, the biggest-selling whisky in Scotland and number two UK-wide behind Diageo blend Bell's, "once again increased sales in 2007/08" but does not put a figure on the increase.

Looking forward, Curle says in his review: "The general economic climate is less optimistic and we are facing significant cost increases in cereals, energy, transport and packaging materials."

A spokesman for Edrington, which is majority-owned by the charitable Robertson Trust, told The Herald: "These cost increases may well lead to price rises at some point in the future. There is only so many of these costs you can absorb as a business before they have to be passed on."

On the increasingly hot topic of responsible drinking, Curle said: "As a company involved in the alcohol beverage sector, it is important that we acknowledge and accept our social responsibilities, that we comply with all relevant marketing codes and try to ensure that our products are consumed responsibly. Our approach to these matters is consistent with our ethos."

The spokesman for Edrington said The Macallan was "nudging" Glenmorangie for number two position worldwide in terms of single- malt brands by volume of sales.

He highlighted the fact that The Macallan, taking value rather than volume of sales, leapfrogged both Glenmorangie and volume leader Glenfiddich to be the biggest single-malt brand in the world.

The spokesman added: "With Macallan in particular we have been concentrating on the value of the brand, particularly in America and in Asia where we have been (driving) premium price position."

He said Highland Park, which is believed to sell about 100,000 cases per annum, was about the 12th biggest-selling single malt worldwide by volume. More than three million cases of The Famous Grouse are sold each year. Macallan passed through the 500,000case per annum mark in 2006/2007.

Curle, in his review, also highlights Edrington's recent purchase of a 61per cent stake in Dominican Republic golden rum Brugal.

Highlighting this new position in rum and Edrington's established interests in single malts, Curle is upbeat about the company's prospects in spite of the "less optimistic" economic outlook.

He says: "Premium Scotch whisky and golden rum are enjoying success across a range of existing and developing markets. Such market conditions augur well for future prospects."

Curle says Edrington's "confidence in The Macallan" is demonstrated by its plan to invest GBP20m in this distillery at Craigellachie on Speyside and associated assets.

He adds that "work is progressing well" on the construction of an initial two warehouses and the recommissioning of a stillhouse, which will increase the distillery's capacity by 30per cent.

Curle says Edrington's Cutty Sark blend "continues to prosper in southern Europe" but "faces a difficult trading environment in a number of other markets".

He adds that Edrington, together with its partner Berry Bros & Rudd, is "enjoying encouraging growth" of The Glenrothes single malt following the introduction of a "Select Reserve" version in a number of key markets.

Edrington is raising its dividend by 11.5per cent to 17.5p per share.

Originally published by Newsquest Media Group.

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