UK brewer Shepherd Neame has reported a 7% rise in net sales for its fiscal first half year, but warned that raw material costs and tax rises have damaged profit.

Net sales for the six months to the end of December reached GBP56.2m (US$82.4m), the company said today (24 March).

Net profit fell to GBP3.6m, down from GBP5m for the same period of 2007, said the Kent-based firm, established in 1698 and which brews Spitfire beer and imports Asahi and Kingfisher brands under licence.

Jonathan Neame, CEO of Shepherd Neame, said: "Despite a difficult economic background, we have delivered a strong sales performance."

He added: "Our retail business has been resilient, with like for like sales down 0.2% for the six months to 27 December but up 1.8% in the 13 weeks ended 28 February 2009. Our London pubs increased like for like sales by 2.9% during the six months to 27 December. Tenanted contribution was down 4.1% on a like for like basis."

UK beer sales fell by more than 5% in 2008, with a steeper decline in the second half of the year, according to the British Beer and Pub Association.

Shepherd Neame echoed the BBPA and other brewers in noting a shift from the on- to the off-trade in the UK. This has accelerated in the wake of an 18% rise in beer duty tax last year, it said.

"Our margins have been squeezed by this change in sales mix and higher raw material unit costs of production. These were 27% higher than the same period last year, but we expect these costs to abate in the middle of 2009," said the brewer.

In the group's outlook, Jonathan Neame said: "We anticipate the second half performance will follow the pattern of the first half. We will continue to experience high costs for the rest of the year but expect them to start to reduce as we enter our next financial year."