Scottish & Newcastle announced on August 15 results for the half year to June 2003 from its 50% owned joint venture Baltic Beverages Holding AB (BBH). EBITDA grew 8% (in US dollars) in Q2 up to US$130 million. Operating profit increased 3% and reached US$130 million. Sales increased 9% to US$376 million. BBH remains confident in the growth prospects for its markets, and anticipates its performance for the full year to be in line with expectations. Beer volumes of BBH registered a strong recovery in Q2, a 10% increase. BBH Russia increased beer volumes in the second quarter by 10% too.

The second quarter, as anticipated, showed a strong improvement in volume trends from the first quarter, both within BBH and for the markets as a whole. BBH remains confident that full year volumes for the Russian market will show high single digit growth, said S&N. In Russia, the changes to Baltika’s distribution network initiated during the low season are largely completed, leading to a much-improved performance in the second quarter.

BBH continued to demonstrate its underlying strengths, with market share growing in Russia by 0.4% to 33.4%, and in the Baltics by 0.8% to 44.9%. In the Ukraine, capacity constraints combined with strong market growth of 15% meant that share fell slightly by 0.2% points to 19.4%. The new brewery in Kiev, due to open in spring 2004, will ease these constraints.

Gross sales per unit (ie including the impact of increased excise duty) grew by c7% in the half, whilst net sales per unit grew by c5%. In addition changes in the mix of packaging types adversely affected net sales by c.3%.

EBITDA margins in the second quarter (34.6%) showed a marked improvement on the first quarter (23.3%), due to higher volumes and relatively lower costs. EBITDA margins for the first half (29.8%) were 3.3% points lower than in the previous year largely driven by start-up costs of two new breweries (Samara and Khabarovsk) of ca Eur 10m, the implementation of distribution changes in Baltika, and increased costs of euro-denominated raw materials.

For the first half the rouble depreciated by 19% against the euro but was broadly level against the US dollar.

Baltic Beverages Holding is a 50:50 joint venture between Scottish & Newcastle plc and Carlsberg Breweries A/S. It operates in six countries in Eastern Europe, including Russia where it is the market leader with a 33.4% market share.

15 August, 2003