Broker snap: UBS more optimistic on Britvic's costs

8th Jun 2011 12:59

Britvic has had its target price raised by UBS, who notes that there is less input cost variability in the current year and cost-cutting measures are now in place for next year.The broker said that the drinks group's 2011 full year (FY) input costs were now 90% hedged, and it confirmed its 2011FY cost of goods sold (COGS) inflation guidance of 9-11%."We believe Britvic has regained some control of its profitability with its planned £8m in cost savings for 2012FY, though PET (plastic) inflation is still a key swing factor," the broker said.While volumes are expected to remain affected by the shift to double concentrate for its Robinson's brand, the sales growth profile remains solid, according to UBS."We previously applied a 10% discount to reflect high input cost uncertainty. We remove this discount, which increases our price target from 390p to 430p." A 'neutral' rating is kept.---BC