Vimto sounds profit warning as shares hit by UAE and Saudi sugar tax

The 50 per cent tax on non-fizzy sugary drinks affects the Ramadan favourite

Vimto is a popular drink in the Middle East, particularly during Ramadan. Instagram / Vimto Arabia
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The maker of Vimto has warned its profits could be hit by the expanded sugar tax brought in by the UAE and Saudi Arabia.

Shares of the company, which sells its drinks in more than 85 countries, fell 17 per cent as it said price hikes to offset the 50 per cent excise tax could hurt sales next year.

Nichols' fruit and herb-based drink Vimto clocks about 80 per cent of Middle East sales in just three months - the month of Ramadan and the two months prior to the festival of Eid.

The company reported first-half Middle East sales of 4.6 million pounds ($5.99 million) earlier this year, compared to group revenue of 71.6 million pounds.

The maker of Levi Roots and Sunkist said that since the tax would be applied on non-carbonated drinks with either natural or artificial sweeteners, product reformulation was not an option.

Nichols expects 2019 pretax profit to be in line with market expectations, with group sales in the full-year seen 4 per cent ahead of last year.

The UAE expanded the 2017 'sin tax' to cover non-fizzy sugary drinks along with a 100 per cent tax on e-cigarettes.

Saudi Arabia has imposed the tax on sugared drinks as it seeks to reduce a budget deficit caused by low oil prices.

The tax falls under the category of selective taxes on products deemed harmful to public health, and comes after soft drink makers in the UK were hit from a British sugar tax which came into effect in April last year.