E-Malt.com News article: 2825

Britain's biggest brewer Scottish & Newcastle Plc announced on June 23 it is confident of meeting its financial goals for 2004 as improved trading conditions combine with deeper than expected cost cuts. "Trading in the first six months of the year has been better than the comparative period in 2003 in all our key businesses," the brewer of Baltika, Kronenbourg and Foster's beers said in a trading update ahead of half-year results on August 3.

S&N's profit before tax in the first six months of 2003 was 217 million pounds ($395 million), including 43 million pounds from its 50 percent owned Baltic Beverages Holding, where S&N sees good volume and profit growth in 2004.

The firm said, however, that comparisons of the second half would be more difficult as summer trading was very strong in 2003. At 0910 GMT, S&N shares were down 0.7 percent t 436 pence, handing back some of their recent gains.

After selling 1,400 British pubs last year to focus on brewing, S&N announced it will close breweries in Newcastle and Edinburgh earlier this year and said beer prices were suffering from competitive take home trade from supermarkets.

In Wednesday's statement, S&N said conditions in the market to supply beer to pubs and bars were slightly better than expected, but shop prices were still under pressure.

The brewer said it anticipated 2004 operating profit in UK beer to be slightly ahead of the 167 million pounds in 2003, and was well positioned for further growth in 2005. “Within Scottish Courage, supply chain performance is greatly improved compared to the same period in 2003 and volumes and market share have benefited from increased marketing and sales support on key brands. There has been faster progress on efficiency improvements than previously anticipated; however, as previously stated, the bulk of the cost savings will not come through until 2005. We now anticipate overall cost savings of some £60 million per annum from the UK business by 2006, against our previous estimate of £45 million per annum. At the same time, we are further increasing our investment in brand marketing.

As a consequence of all these factors, we anticipate that operating profit for 2004 will now be slightly ahead of the underlying performance in 2003 and that we are well positioned for further growth in 2005.”

"We now anticipate overall cost savings of some 60 million pounds per annum from the UK business by 2006, against our previous estimate of 45 million pounds per annum," it said.

“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 the better trading environment. For the balance of 2004 comparatives with 2003 are more difficult due to the good summer last year, but we remain confident in our brand strengths and good market positions.

Eastern Europe (Baltic Beverages Holding): The results for the first quarter of 2004 announced on 6 May 2004 showed beer volume growth of 10%, net sales up 31% (US dollars) and EBITDA up 26% (US dollars). BBH’s most important markets in Russia and the Ukraine continue to demonstrate 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.”

Scottish & Newcastle (S&N) is an international brewing company with market leading positions in 15 countries in Europe and Asia. 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 and has sales of 50 million hectolitres per annum.


25 June, 2004