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Britain's biggest brewer, Scottish & Newcastle Plc, said on February 3 it would take an extra 15 million pound ($25 million) hit in its fiscal second half from problems in reorganizing its UK beer division, Scottish Courage.

The firm, which brews three of Europe's top 10 beers in Kronenbourg, Foster's and Baltika, said the division was also unlikely to achieve any significant growth in operating profit in calendar 2003.

Scottish & Newcastle (S&N) warned investors on December 3 that reorganising Scottish Courage's supply chain had resulted in greater than expected disruption costs and delays in making cost savings.

But the firm added on Monday that productivity at its new regional distribution centres was substantially short of expectations and that it was having to keep its old depot network open, resulting in "double running" costs.

"Scottish Courage is taking strong management actions to resolve this issue, however, it is expected that the business will incur additional costs in the supply chain for the remainder of the calendar year," S&N said in a statement.

S&N has expanded rapidly into brewing, buying France's Kronenbourg in 2000 and then Hartwall in 2002 to tap the fast-growing Russian beer market.


03 February, 2003