McBride margins wiped out by rising costs
McBride (MCB) 96.8p
Loss to date: 20% (stopped out)
Original entry point: Buy at 139.4p, 26 July 2018
Sadly we are pulling the plug on private label product-maker McBride (MCB) after it broke below our 100p stop loss last week.
In an unscheduled trading update the group warned that this year’s pre-tax profit would be 10% to 15% below last year, sending the shares tumbling.
The firm’s previous guidance was for profit to rise by 10% to 15% on the back of strong sales growth.
While sales are up over 10% at the half year stage, in line with guidance, margins have been flushed away by higher than expected costs for raw materials and distribution.
McBride supplies private-label toiletries and household products to big retailers and supermarkets in the UK and Europe, putting it in competition with global giants such as Proctor & Gamble, Reckitt Benckiser (RB.) and Unilever (ULVR).
The costs of making, transporting and warehousing its products have risen much more sharply than anticipated and while it can claw back some of the lost margin through price increases it is nowhere near enough to prevent profits from falling this year.
It also faces complications due to Brexit with some of its products imported from the EU and sold in the UK so the outlook is set to become even more uncertain next quarter.