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Scottish & Newcastle PLC is eyeing further opportunities in the Far East and looking to expand its presence in the region following two recent deals that took it into China and the Indian sub-continent, AFX commented on February 23.

S&N recently invested GBP 171 million in an Indian joint venture with United Breweries, the country's leading brewer, while in November it purchased a 19.5 pct stake in the Chongqing Beer Company, China's fifth biggest brewer by volume. 'The fast-growing emerging markets are attractive for us,' S&N's chief executive Tony Froggatt told AFX News in a telephone interview this morning.

'We'll be looking to consolidate our investments in China and India, while we're not ruling out other selective acquisitions or strategic partnerships in the region,' he added. Asia is the second largest beer market after Europe and Froggatt said S&N would use the platforms created in India and China as a springboard for further growth.

In its main European beer market, expansion through acquisition is getting harder to achieve as the market consolidates around three or four big players.
'There are less opportunities in Europe than there were a few years ago,' S&N's finance director Ian McHoul told AFX News. 'The days of the big blockbuster deals when brewers paid hundreds of millions of pounds are over,' he continued.

Earlier today, S&N announced its preliminary results for the year to Dec 2004. Pretax profits for the period came in at GBP 373 million, compared to an adjusted proforma figure of GBP 336 million to take into account the sale of its managed pubs division in 2003.

The improvement in trading was driven by a strong recovery from Scottish Courage, the UK brewing division, where operating profits grew by 11% to GBP 176 million as volumes of its top four brands -- Foster's, Kronenbourg 1664, John Smith's and Strongbow -- increased by 4.5 pct. Better operating efficiencies and moves to improve the supply chain also helped the overall result with some GBP 3 million of savings coming through in 2004. The group, which closed two breweries in Edinburgh and Newcastle last year, has already promised GBP 60 million of cost savings by 2006 and McHoul said a further incremental GBP 30 million of savings would come through in 2005.

'The total annualised savings of GBP 60 million is a conservative figure and one we're confident of achieving,' he added. Some analysts reckon S&N may up its savings target to around GBP 75-80 million as further costs are taken out.
However, McHoul ruled out further brewery closures and said there were no
more 'big bangs' in the pipeline. 'Additional savings will be achieved gradually through a number of measures. There are no big one-offs,' he said.

In the group's international division, operating profits were flat at GBP 189 million as the French market remained weak with beer volumes down by 4.9 pct. In contrast, sales of Newcastle Brown Ale into North America were up by 10.5 pct as Americans developed a taste for the flagship brand.

S&N also saw a good second half performance from its 50 % investment in Baltic Beverages Holdings (BBH) -- its joint venture with Carlsberg AS -- where operating profits were up 12% to GBP 93 million. Sales here grew by 29% to GBP 525 million as volumes increased by 18 % led by a strong second half improvement in Russia where volumes were up 22% as the impact of the marketing initiatives flowed through to the top-line.


23 February, 2005