E-Malt.com News article: 2571

UK: Britain's biggest brewer, Scottish & Newcastle Plc, said on April 29 that trading in the first four months of 2004 had been better than in the comparative period of last year. Scottish & Newcastle PLC’ Chairman, Sir Brian Stewart, made the following statement at the Annual General Meeting on April 29, 2004:

“Operationally, the results announced for the eight-month period from May to December 2003 demonstrated improving trends in all our major markets. Our priority is to continue improving the performance of the core business by developing our excellent brand portfolio and increasing operational efficiency and integration across the group.

Strategically, the group has made considerable progress. The successful sale of the Managed Retail business for £2.5bn has enabled Scottish & Newcastle to become a financially robust and focused international brewer. We have shown continued ability to add to the strength of our core businesses, through the successful and earnings enhancing acquisitions of the Bulmer’s cider business in the UK and the Central de Cervejas acquisition in Portugal. We have also made good progress in our partnership arrangements in India, and most recently with Chongqing brewery in China, whilst through BBH we have expanded our network in Russia, Ukraine, and Kazakhstan. These developments give us strong and growing positions in several of the world’s fastest growing beer markets.

Trading in the first four months of the year has been better than the comparative period in 2003. Whilst this period of the year is the quietest, the good start gives us more confidence that we will meet our financial and commercial objectives for 2004.

Our brands have experienced good trading conditions since January, led by very good performances from Foster’s and Kronenbourg 1664. This follows a strong performance over Christmas 2003 and gives us growing confidence in the momentum of our key brands. Market share growth has resumed with improving trends in both on and off trade.

Operationally, the business is taking the necessary steps to improve its efficiency and performance. The recently announced decisions to close the Fountainbridge and Tyne breweries whilst difficult and sad for those affected, will improve the cost base of the ongoing business and enable increased investment in our strong brands. The recovery in customer service from our UK supply chain has been strong and continuing, and we are now making substantial progress in improving the cost efficiency of the network. We also announced a series of changes which will further enhance operational efficiency in all parts of the business including; the joint venture for Technical Services with Carlsberg UK, the merger of Waverley and The Beer Seller, and the move to packaging ‘widget’ John Smith’s cans in-house.

Since January the Beer markets in Western Europe have been more robust than in the comparative period in 2003, and our businesses have all benefited from this better trading environment.

In France, our premium brand volumes have been strong and our premium brands Kronenbourg 1664, Foster's, and Grimbergen all continue to gain market share. In Belgium, the domestic on trade market has been weak but this has been offset by good growth in the off trade. In Portugal, a strong off trade has led to good growth in beer volumes, particularly from the Sagres brand. In Finland, the change to the local duty regime ahead of the accession of the low duty Baltic countries to the EU in May, has boosted the market in the short term, but the full effects of the anticipated increase in beer imports have yet to be seen.

For the balance of 2004, comparatives with 2003 are more difficult, but we remain confident in our brand strengths and good market positions.

The results for the first quarter of 2004 will be announced on May 6th. The full year results for 2003 were published on the 10th February, and showed beer volume growth of 8%, and turnover growth (in US dollars) of 13%. BBH’s most important markets Russia and the Ukraine continue to demonstrate continued robust growth. BBH remains confident in the prospects for its markets and believes that it is well positioned for good volume and profit growth in 2004.

The triennial actuarial valuation of the main S&N pension scheme at 31 October 2003 has now been completed. As anticipated, in line with many UK Pension funds, the scheme is in deficit and the valuation has shown a shortfall of £424m. The company has agreed with the trustees of the scheme to make a one-off special contribution of around £200m towards this deficit. Together with contributions made in December 2003 this will reduce the shortfall to around £200m. This special contribution demonstrates the company’s financial capacity and continuing commitment to ensuring that employees and pensioners benefit from a well-funded pension scheme.”

Scottish & Newcastle is an international brewing company with market leading positions in 13 European countries. S&N has three brands in the top ten of Europe in Baltika, Kronenbourg and Foster’s. S&N has an interest in 50 breweries worldwide and has sales of 50m hectolitres per annum.


30 April, 2004