IRN Bru producer AG Barr has warned it will suffer a material hit to its financial performance amid the fallout from the coronavirus as it prepares to put around one in five of its employees on furlough.

The Cumbernauld-based soft drinks maker said the Government’s lock-down measures are hitting the “out of home” consumption of soft drinks resulting in a sharp drop in sales of its products in a profitable market.

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“Sales via our “impulse” customers (c.40 per cent of total revenue) have significantly reduced as a result,” AG Barr told investors yesterday.

The company said sales of ‘take home’ purchases have been relatively resilient but more volatile than usual.

It warned: “As a result, we expect there to be a material adverse impact to the Group’s financial performance due to these fast changing circumstances, however at the current time the quantum of this remains uncertain.”

Stock market-listed AG Barr reckons it is in good shape to cope with challenging conditions as it has a strong balance sheet.

However, it has suspended dividend payments and launched a cost cutting programme to help conserve cash.

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The company said it had commenced a furlough process under the Government-funded job retention scheme.

A spokesperson said around 18 per cent of the total workforce are expected to be placed on furlough.

It is not clear how many positions will be affected in Scotland. AG Barr employs 525 people in Scotland out of a group total of around 950.

The company said members of the board and senior executive team have agreed to a voluntary 20% salary reduction for a minimum of three months to help support the business through these difficult times.

The company has put a freeze on investment in new assets and is cutting back marketing and commercial activity.

Chief executive Roger White said: “The actions we are taking to conserve cash and reduce costs, combined with our strong financial base, give us confidence in the resilience of our business for the long term.”

However, noting that the Covid-19 situation is materially impacting AG Barr’s business, he cautioned: “There is no immediate certainty around the severity and duration of the impact.”

The company included the update in the announcement of its results for the year to January 25, which Mr White said had been disappointing overall. The UK’s sugar tax and unhelpful weather compared with the record-breaking summer of 2018 posed challenges for the firm.

The publication of the results was delayed from last month after the regulator asked firms to put such announcements on hold amid uncertainty about the implications of the rapid spread of the coronavirus.

AG Barr saw profits fall by 17.3% in the latest year, to £37.4m, from £45.2m last time.

In July it had warned that profits were expected to fall by up to 20% in the year.

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Sales fell by 8.4% to £255.7m, from £279mm.

Mr White said the core soft drinks business had underperformed both the market and the company’s own expectations.

Sales of Irn Bru were impacted following increases in selling prices during the latest year. The company had previously followed a volume-led approach in response to the introduction of the sugar tax, or Soft Drinks Industry Levy, in April 2018.

The Irn Bru brand returned to value growth in the final quarter, after a period of adjustment to new consumer price points.

Mr White said AG Barr had also made progress in what it sees as attractive growth markets through the development of ranges such as Funkin ready to drink cocktails. The company invested £1m in the owner of the STRYYK zero proof spirits brand.

AG Barr said its production plants and logistics sites remain operational with strict safety, hygiene and social distancing measures in place.

Its main production sites are in Cumbernauld and Milton Keynes.

The company said it has taken steps to ensure its raw material availability and stockholding is as robust as possible and had experienced no difficulties.

Darren Shirley at AG Barr’s house broker Shore Capital said: “We believe the Group has adequate liquidity to ride-out the current crisis, and a well invested stable of brands from which it can drive growth over the medium to long-term.”

Shares in AG Barr closed up 3p at 512p.

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