Royal Unibrew has warned that high raw material costs and ongoing price competition in northern Europe could hit its performance this year.

The Danish brewer issued a note of caution on its 2007 outlook even as it posted a 15% jump in operating profit for 2006.

Royal Unibrew, which has operations in Denmark, Poland and the Baltic states, said today (5 March) that "significant increases" in the price of malt, hops and aluminium cans would weigh on the business next year.

The company said the hike in costs would stand at around DKK30m (US$5.3m) for 2007. Royal Unibrew warned that it might not be able to pass these increases on to consumers. It said: "In northern Europe, nothing seems to indicate that the keen price competition and resulting price pressure should be on the wane."

Looking back to 2006, Royal Unibrew posted operating profit of DKK348m, up 15% on the year. However, losses from its operations in Eastern Europe hit earnings, as the company absorbed costs linked to the integration of its business in the Baltics and Poland. Revenues in the region rose 16% thanks to increased sales in Latvia and Lithuania.

Group revenues rose by 8% to DKK3.5bn as sales rose in the company's key markets of Denmark, Germany and Italy.

Royal Unibrew's domestic performance was boosted, however, by a robust performance from its soft drinks business. The company, which holds the PepsiCo franchise in Denmark, saw its domestic soft drinks sales jump 17%.