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Britvic margins flat as raw material costs soar

Robinsons and Tango firm Britvic warned a "rapid and unprecedented" surge in raw material costs will stifle profit growth this year.

The Chelmsford-based group, which owns the rights to sell Pepsi products in the UK, said it had been adversely impacted by the rising cost of steel and sugar, as well as plastic material PET, which is used to make drinks containers.

Britvic said it now expects 2011 input costs in Britain and Ireland to increase by 9% to 11%, up from guidance of 5% to 6%, and no longer expects any operating-profit margin improvement this year.

The company is the latest to warn of soaring commodity costs, joining the likes of food giants Nestle and Unilever.

The company, which still expects to grow operating profits in the current financial year, said the British market was showing signs of resilience, with take-home market volumes up 2.9% year-on-year in the four weeks to January 22.

Paul Moody, Britvic chief executive, said: "Since our last update we have witnessed a rapid and unprecedented uplift in the cost of key raw materials.

"This has been driven by a shortage of supply to the market, where, for example we have seen prices for PET, derived from oil, surge by around 20% in the last month alone."

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Shares in Britvic, Britain's second biggest drinks manufacturer after Coca-Cola Enterprises, slumped 5% following the update.

Last month it emerged that nine people will be made redundant from Britvic's soft drinks distribution centre in Omagh, while three face the axe at the firm's offices on the Castlereagh Road in east Belfast.

The Omagh business will transfer to the Castlereagh Road and 91 people will remain employed with the company.

Approximately 100 redundancies are being sought in Ireland.