The UK brewer Scottish & Newcastle said today that it’s 50% owned joint venture subsidiary, Baltic Beverages Holding (BBH), anticipates its performance for the full year to be in line with its expectations.
But despite the statement shares in S&N fell by almost 4% as it became apparent that sales at BBH had fallen 15% in the first quarter of 2003.
“The first quarter, due to the winter weather is the low season for beer sales throughout BBH’s areas of operation. Operating costs for the period were adversely affected by the implementation of distribution changes in Baltika and start up costs at two new breweries. BBH remains confident in the growth prospects for the market,” a statement said.
The company said that continuing gains in market share at BBH continued to demonstrate its underlying strengths in a quiet quarter for beer markets in its areas of operation. Market share grew in all three regions: in Russia by 0.8% to 34.3%, in the Ukraine by 1.4% to 20.4% and in the Baltics by 0.2% to 45.5%.
But market volumes in Russia fell by 5% against a strong comparative period last year.
“As the quarter progressed, market volumes improved and BBH remains confident that full year volumes for the market will show high single digit growth. BBH’s volumes are expected to move ahead of the market leading to continued share gains,” the statement said.
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Costs incurred during the start-up phase of two new breweries (Samara and Khabarovsk), increased investment in marketing, and the implementation of distribution changes in Baltika added significantly to operating expenses during the period. As a consequence, the company said margins for the period were significantly lower than in the previous year.
For the full year BBH expects margins to recover as the new breweries reach full efficiency and distribution changes are completed.
“For the period the rouble depreciated by 3% against the U.S. dollar (against the same period in 2002) and by 20% against the euro during the same period. Due to these variations overall sales increased by 4% in dollar terms and fell by 15% in euros,” the statement added.
