Morning Note: Market news and an update from drinks company C&C.

Market News

Friday’s US employment data provided mixed signals, leaving markets unclear over the scale of interest cuts later this month. The economy added fewer jobs than expected – non-farm payrolls data for August were 142k versus 165k forecast – with significant downward revisions to June and July figures. However, the unemployment rate fell to 4.2% as anticipated, and wage growth increased to 0.4%, exceeding the forecasted 0.3%. The 10-year Treasury yields trades at 3.74%, while gold has slipped to $2,495 an ounce.

US equities endured their worst week since March 2023, with Friday’s decline – S&P 500 (-1.7%); Nasdaq (-2.6%) – compounding earlier falls. In Asia this morning, equity markets were also weak: Nikkei 225 (-0.5%); Hang Seng (-2.1%); Shanghai Composite (-1.3%). The yen slipped to 143 against the dollar. China’s key price indicators missed the mark in August, heightening deflationary concerns. CPI rose 0.6% from a year earlier, while factory gate-prices dipped 1.8%.

European markets have opened on a more positive note. The FTSE 100 is currently 0.7% higher at 8,228, while Sterling buys at $1.3090 and €1.1844. Iron ore fell below $90 for the first time since November 2022 and Brent Crude rose to $72 a barrel. Morgan Stanley cut its fourth-quarter forecast to $75.

Donald Trump pledged to slap a 100% tariff on goods from countries that shun the dollar. Meanwhile, China said it will fully open its manufacturing sector to foreign investments and is also allowing more room for overseas capital in its health sector. Beijing said it firmly opposed stricter Dutch curbs on chip equipment.

Boeing reached a deal with its largest union to potentially avoid a strike that includes a 25% wage bump over four years. Workers still need to vote on the accord.

Source: Bloomberg

Company News

C&C Group has this morning provided an update on recent trading which highlights that although current market conditions remain challenging, earnings have been in line with expectations. The group remains confident of achieving its operating profit target for the current financial year and, in response, the shares are up 1% in early trading.

C&C is a leading, vertically integrated drinks company which manufactures, markets, and distributes branded beer, cider, wine, spirits, and soft drinks across the UK and Ireland. The group’s brands include Tennent’s, Magners, and Bulmers. The company exports its Magners and Tennent’s brands to over 40 countries worldwide. Through Matthew Clark and Bibendum, C&C is the largest drinks distributor to the UK hospitality sector.

Operationally, the key priority is to deliver the substantial restructuring actions throughout the business in order to drive forward revenue, improve margin, and generate operating profit of €100m by FY2027. The plan is also to return up to €150m to shareholders by the end of FY2027, while maintaining the financial leverage target of approximately 1x net debt to EBITDA.

During the half year to 31 August 2024, net revenue is expected to have fallen by 3%, reflecting growth in Matthew Clark & Bibendum, in-line performance across the core and premium brands, offset by the impact from the disposal of the NAB business in Ireland, lower contract brewing volumes, and softer cider volumes in GB.  Performance at the Matthew Clark and Bibendum businesses has also been encouraging with net revenue expected to be up 2%.

Tennent’s achieved volume and value share growth over the latest 12 weeks, supported by targeted marketing campaigns around the Euro 2024 tournament and, despite mixed summer weather, Bulmers outperformed the cider market in Ireland. The premium beer and cider brands, driven by Menabrea and Orchard Pig, continued to perform strongly, reporting double-digit revenue growth.

Underlying operating profit is expected to be in the range of €39m-€41m, in line with management expectations, principally reflecting the phased rebuilding of the group’s distribution business profitability following last year’s ERP disruption.

The second €15m tranche of the group’s share buyback programme will commence today.

Source: Bloomberg