Vimto manufacturer hit by Yemen civil war and Saudi Arabia's slowing economy

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The company behind Vimto has said that profits will be held back following a blockade of the fizzy drink in war-torn Yemen and a slowing economy in Saudi Arabia.

Nichols said that the recent escalation of hostilities in the Arab nation has resulted in the supply route to its Yemeni distributor being blockaded, meaning it is unable to send Vimto shipments as planned this month.

As a consequence, adjusted pre-tax profit for 2017 is expected to be in line with last year.

For next year, Nichols believes the conflict, coupled with “slowing in the Saudi economy”, will mean sales across the region are “likely to be less than previously anticipated”.

Management now expects “low single digit percentage profit growth in 2018” in comparison to the current year.

Vimto books big sales throughout the Middle East as the drink has become popular with Muslims, who have taken to drinking the sugary fruit drink before fasting through the month of Ramadan.

However, Nichols' Middle East woes are in stark contrast to sales to the UK, where Vimto sales are up over 9 per cent year on year, well ahead of the market.

The group said that the strong performance helped it mitigate rising costs linked to the weak Brexit hit pound.

Revenues in Africa are expected to rocket by 20 per cent.

“We anticipate the strong growth trend in Africa to continue in 2018.

“For the year ahead, we are confident that the strong sales trend will continue in the UK with the Vimto brand being supported by a new marketing campaign launching in the spring.

“Our diversified business model is expected to deliver continued sales growth into 2018 and the group remains highly profitable.

“In addition, our strong balance sheet and cash generation supports ongoing investment in our growth strategy and our ability to sustain a progressive dividend policy.”

The firm added that it is well prepared for the introduction of the sugar tax, with the Vimto and Feel Good brands portfolio already below the levy's threshold.

Nichols, which sells in more than 85 countries, owns brands such as Levi Roots soft drinks, Feel Good and Sunkist.

In June, the Vimto maker posted a 6.8 per cent rise in pre-tax profits to £12.7m for the six months to 30 June.