E-Malt.com News article: 1035

The UK brewing conglomerate, Scottish & Newcastle, announced on May 8, 2003 results for the first quarter to March 2003 from its 50% owned joint venture Baltic Beverages Holding AB (BBH). The first quarter, due to the winter weather is the low season for beer sales throughout BBH's areas of operation. Operating costs for the period were adversely affected by the implementation of distribution changes in Baltika and start up costs at two new breweries.

BBH remains confident in the growth prospects for the market, and anticipates its performance for the full year to be in line with its expectations. BBH continued to demonstrate its underlying strengths in a quiet quarter for beer markets in its areas of operation. Market share grew in all three regions: in Russia by 0.8% to 34.3%, in the Ukraine by 1.4% to 20.4% and in the Baltics by 0.2% to 45.5%.

Market volumes in Russia fell by 5% against a very strong comparative period last year. (2002 volumes increased 21% vs 2001). Volumes in the period grew by 4.7% in the Ukraine, and were level in the Baltics. As the quarter progressed, market volumes improved and BBH remains confident that full year volumes for the market will show high single digit growth. BBH's volumes are expected to move ahead of the market leading to continued share gains.

Sales, in local currency terms, increased by c.6% on total beer volumes down 1%. Sales per unit were affected by changes in the mix of packaging types. For the year as a whole, prices are expected to move in line with inflation. Costs incurred during the start-up phase of two new breweries (Samara and Khabarovsk), increased investment in marketing, and the implementation of distribution changes in Baltika added significantly to operating expenses during the period. As a consequence margins for the period were significantly lower than in the previous year. For the full year BBH expects margins to recover as the new breweries reach full efficiency and distribution changes are completed.

For the period the rouble depreciated by 3% against the US dollar (against the same period in 2002) and by 20% against the euro during the same period. Due to these variations overall sales increased by 4% in dollar terms and fell by 15% in euros. A slide presentation of the results will be available on the Scottish & Newcastle website from 11am on Thursday 8th May.

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 34% market share.


08 May, 2003