TURKEY: Efes Breweries International sees FY profit dip, sales rise

Efes Breweries International has reported a slip in full-year operating profit for 2008, despite an increase in net sales in the period.

The company, which is majority-owned by Turkey-based beverage giant Andalou Efes, said late last week that its operating profit for 2008 fell by 8.6% on 2007, coming in at US$73.6m.

The decrease came in spite of a 24.1% leap in net sales, which totalled $1.04bn in the year. Volumes also improved, rising by 5.5% to 14m hectolitres.

EBI recorded a net loss of $57.4m in 2008, however, against a net profit a year earlier of $37.5m.

Expenses in the year rose due to non-cash foreign exchange losses due to the strengthening of the US dollar against local currencies. The company was also hit by "higher financial indebtedness" compared to 2007, due to increased funding requirements for the acquisition of Georgian drinks group Lomisi last February, increased working capital needs due to higher commodity prices and a capital expenditure requirement of $171.4m to pay for capacity increases in Kazakhstan and Moldova as well as in malteries in Russia.

In Russia, which accounted for 78% of EBI's volumes in 2008, the market delivered "moderate" growth in the first six months of the year, although volumes turned negative in the second half, on the back of lower than average temperatures and the deteriorating consumer confidence as a result of the global financial crisis. Higher than inflation price increases in the beer market also had a negative impact on consumption, the company noted.

EBI's chairman and CEO, Alejandro Jimenez, said: " 2008 has been the start of what we can call a 'once in a lifetime' global economic crisis. The inflationary pressures in our operating markets, combined with the significantly deteriorated consumer confidence in the second half of the year impacted the sales volume performance of our markets.

"In 2008, one of the key challenges in the brewing industry has been the increased cost of raw materials. This had a negative impact on our profitability in 2008, in line with our guidance, yet at a lower rate for the full-year compared to previous quarters. We believe that our business is robust, but this doesn't mean we are not increasing our defence strategies against the challenges being post by the negative macroeconomic developments."

EBI said it will focus on managing its working capital going forward, by cutting its capital expenditures by almost half on 2008. "We are confident that we will complete the challenging year ahead with a solid operating performance," Jimenez said.