Despite months of sweeping cost reduction measures, profits of Peru's San Juan brewing company dropped 15.8% during the first three quarters of this year.

The company, owned by the Backus Group, declared US$2.2m in profits for the year to September, compared to US$2.7m during the same period of 2000. San Juan sold US$17.6m during the period, US$1.9m less than in 2000.

San Juan executives said the profit loss was due to an economic recession in Peru that caused beer sales to drop 9.9%.

In response to the countrywide drop in beer sales, San Juan management embarked on a plan earlier this year to reduce production costs. Still, the company's operational profits fell 23% during the year to September.

Overall profits were helped, however, by US$576,000 dividends it received from a subsidiary.

Cost reduction has not yet buried an investment project scheduled for the end of the year that would replace much of the company's equipment with more modern machinery.

San Juan hopes this will improve production, quality and distribution in Peru's jungle regions. The brewer's executives said, however, that this project could still be delayed, since it is funded by company savings that may diminish if sales continue to drop.