Edrington, producer of Cutty Sark and The Macallan Scotch whiskies, has reported an overall loss of £90.4m after its Brugal rum brand failed to meet expectations.
The launch of Brugal Especial Extra Dry has helped buffer sales of the rum brand in the US
In its 2013 financial results to 31 March, the Glasgow-based company reported “another record year of trading” as both turnover and profit increased.
The group reported turnover growth of 6% to £591.3m and a profit before tax increase of 13% to £168.6m, although the figure excluded an “exceptional charge” of £274.8m related to a write-down of its Brugal rum brand – the world’s fifth largest rum brand – that has been struggling in its key Southern Europe markets.
Edrington claims the adjustment reflects the directors’ view of future cash flows “which are projected to be less than those estimated at the time of the brand acquisition in 2008”.
With the adjustment included in Edrington’s balance sheet, the group reported an overall loss of £90.4m for the year, off the back of a £65.4m profit in the previous year.
“The premium rum market continues to excite consumers through product quality and authenticity,” explained chairman Sir Ian Good, who also announced his retirement from the company at the group’s AGM. “Rum brands have been rapidly premiumising to take advantage of this trend and Edrington has valuable experience of how to accomplish this in Scotch whisky. Our plan for Brugal has been buffeted by the enduring economic depression in Southern Europe but our confidence in the brand is reflected in our continued investment behind it.”
Brugal is the number one rum brand in the Caribbean and Spain.
Despite its struggles in Southern Europe, Brugal’s sales grew 22% in the US, driven by those in New York, Boston and Chicago.
Meanwhile, Edrington’s Scotch whisky portfolio continued to thrive, with the value of the group’s overall stocks – across The Famous Grouse, The Macallan, Highland Park and Cutty Sark brands – increasing £12.7m.
“The Scotch whisky market continues to thrive, enthralling consumers in emerging markets,” added Good. “In 2012 exports reached a further record level, delivering £4.3 billion to the UK balance of payments (£135 per second). Of equal encouragement is the sustained nature of this growth, allowing our company to plan and invest with confidence.”
The results come just weeks after the group revealed plans to establish distribution arms in the US, South East Asia and the Middle East and Africa, which according to Ian Curle, chief executive of Edrington, will “provide further development and expansion opportunities for Edrington”.
Good, who has worked at Edrington since 1969, will be succeeded as chairman by non-executive director Norman Murray.
“Since joining the Company in 1969 I have been privileged to be associated with a period of very positive change. In the last 15 years the whisky production company that I joined has become an owner of sought after brands, stretched out of Scotch whisky into Dominican rum, and blossomed into an international company.
“Over these years of change and growth I have been fortunate to work with outstanding teams and colleagues, and this is a final opportunity to express my thanks to them and my confidence in Edrington’s prospects under the continued leadership of Ian Curle.”