THE boss of AG Barr has played down the risk posed by Brexit to the Irn-Bru maker, which shrugged off the challenge brought by the introduction of the sugar tax to post an increase in profits in its most recent financial year.

The Cumbernauld-based firm has been preparing for the UK’s troubled withdrawal from the European Union (EU) by stockpiling ingredients and hedging against currency movements.

But chief executive Roger White declared that the soft drinks market was more likely to be profoundly influenced by weather patterns and promotional activity than the rapidly-changing Brexit picture at Westminster.

Asked whether the soft drink market has been affected by the ongoing political and economic uncertainty, Mr White said: “Not really. If the sun shines or there is promotional activity it is far more likely to have a material effect than some further vote in the Houses of Parliament, frankly.

“All of us are concerned about uncertainty at a corporate level, and all of us would like to see economic stability across the UK. But in terms of its impact on us as a group and as a business, I think it is probably at the lower scale of impacts.”

READ MORE: Has AG Barr done the right thing in changing the Irn-Bru recipe?

Mr White noted the company’s exposure to Brexit is in the form of exchange rate fluctuations, and through importing raw materials and packaging, which it brings into the country from Europe or via the continental mainland. He said: “We have taken steps to ensure we have got higher levels of cover across the piece to safeguard against any of those hiccups in the supply chain.”

Mr White added: “We have just made sure we have sufficient quantities of any of the more sensitive imported materials. It is a bit of a working capital hit [but] it is not such a big issue for us.”

Mr White comments came as Barr unveiled a 2.5 per cent rise in underlying profits to £45.2 million for the 52 weeks ended January 26, with revenue climbing by 5.6% to £279m.

Profits and revenue rose during a year which saw the firm phase in a new recipe for Irn-Bru to ensure it was exempt from the soft drinks industry levy. The firm faced challenges brought by severe weather with the Beast from East early last year, customer business failures and ongoing customer credit risks, as well as carbon dioxide shortages during the prolonged warm weather in the summer.

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The sugar tax, introduced in April, is levied on producers whose drinks include at least five grams per sugar per 100 millilitres of liquid. Barr controversially altered its famously-secretive recipe for Irn-Bru to ensure it was not exposed to the tax.

The firm noted yesterday that its reformulation plan means that 99% of its soft drinks portfolio is currently exempt from levy, though Mr White said the introduction of the tax had led to “distortions in both value and volume performance in the market”. He cited market analysis by IRI which showed that the value of the carbonated soft drinks market had grown by 11.6% while volume increased by 2.7%.

The Irn-Bru chief said AG Barr had anticipated that there would be price inflation as the levy filtered through to the retail sector, and had ushered in a short-term strategy to boost volumes through pricing and promotions while the market adapted to its recipe change.

Mr White noted: “Our view was that we would see our volume advance ahead of our value, which was not our traditional modus operandi, but for one year while there was this transition it was the right thing to do.

“We will see a much more traditional performance as we look forward into this year, where we would assume that our value performance will outstrip our volume as we move back to business as usual.”

Meanwhile, although Barr said that it had seen a number of customer business failures last year, Mr White does not believe that customers are at a higher risk of failure in 2019. “We’re not seeing that dramatically change at the minute,” he said.

Mr White added: “It was an interesting year, last year. There was lots of change, and with that comes opportunities and challenges. [We are] very happy to have got to the end of the year and met expectations, delivering against our plans.”

The company proposed a final dividend of 12.74p per share to give a total of 16.64p per share for the year, a 7% rise.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The sugar tax was expected to be a major headwind for AG Barr – after all, its flagship Irn-Bru brand is famously sweet.

"In the end though a successful reformulation to keep it below the levy threshold, and a decent marketing budget, has meant that Barr’s actually gained market share. Volume growth’s come at the price of some operating margin, but was still enough to see profits climb this year, albeit modestly."

Shares in AG Barr closed up 2.3%, or 18p, at 795p.