E-Malt.com News article: 2602

East European brewer Baltic Beverages Holding (BBH) reported on May 6 a 7% rise in first-quarter Russian beer volumes, but lost market share and profit margin as competitors stepped up the pressure. BBH, 50-50 owned by Denmark's Carlsberg Breweries and Britain's Scottish & Newcastle, said it expected beer volume growth for the full year in its key Russian market slightly higher than first forecast at up to 7%, according to Reuters.

The brewer, whose key asset is a majority stake in Russia's biggest brewer Baltika, which provides 80 % of BBH profits, said it expected the Russian beer market to grow by five to seven percent after a seven percent rise in 2003. Back in February, BBH had expected the Russian market to grow at around five percent in 2004, but an S&N spokesman said that the forecast had improved after the strong first-quarter.

Carlsberg and S&N see BBH as a major area of growth as they both operate in mature western European markets, while Russia -- the world's fifth-biggest beer market after China, the United States, Germany and Brazil -- is one of the fastest growing with annual growth of nearly 20 percent over the last five years.

But analysts said BBH's Russian first-quarter growth of seven percent came as the overall Russian market expanded by some 15 percent, so BBH lost market share while its pricing did not match local inflation and cost increases cut into margins.

S&N shares dipped 1.5 % to 408 pence by 1030 GMNT as investors focused on market share and margin losses rather than the growth in the Russian market. Carlsberg shares were up 2.5 % at 296 Danish crowns after its first-quarter results.

BBH said its leading share of the Russian beer market slipped slightly to 32.6 percent from 33 percent at the end of 2003 as big competitors such as number two player Sun Interbrew increased production. In addition, BBH beer prices increased nine percent in local currencies but real prices slipped with local inflation running at 12 percent, while margins suffered from big investment in beer distribution and increased advertising costs.

The BBH results were affected by currency movements with the Russian rouble gaining 10 percent against the dollar over the last year but it was five percent weaker against the euro.

The weak U.S. currency helped BBH's results in dollars with first-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) up 26 percent at $68 million, but it saw just an eight percent rise to 54 million euros ($65.56 million). BBH's EBITDA margin dipped 0.8 points in euros to 22.3 %.

BBH, which also operates in Ukraine, Kazakhstan and the three Baltic states of Lithuania, Latvia and Estonia, said its overall first-quarter beer sales volumes rose 10 percent, after an eight percent rise in 2003.

Carlsberg posted first-quarter figures, showing earnings before interest, tax and amortisation (EBITA) rising sharply to 154 million Danish crowns from a previous 18 million, but below market expectations.


07 May, 2004