08 November 2003 01:54
Chill hurts S&N hopes in Russia BEVERAGES:
Scottish & Newcastle shares fell yesterday after the brewer revealed that
one of the coldest Russian summers for 40 years had affected prospects at its
jointly-owned eastern European beer group.
The principal asset of Baltic Beverages Holdings (BBH), which S&N owns
with Carlsberg Breweries, is a majority stake in Baltika, Russia's
biggest brewer.
S&N said that because of the weather, it expected beer volumes in Russia
to grow at 5 per cent this year rather than the 7-9 per cent predicted
earlier.
The company said it expected its own Russian volumes to outpace the overall
market and forecast an annual 8 per cent rise in volume compared with its
nine-month growth of 7 per cent. However, pressure on margins continued.
Analysts said the news, although expected, was still a disappointment and
there were concerns coming out of Carlsberg that the margin deterioration
could continue beyond next year.
Russia is the world's fifth-biggest beer market after China, the US,
Germany and Brazil and has been one of the quickest to expand, with annual
growth of almost 20 per cent over the past five years.
One analyst said: "BBH has pulled back its forecast for growth in the
Russian beer market, while there is pressure on pricing and hence profit
margins."
S&N shares, already off 27 per cent since the start of the year, were
among the worst performers in the FTSE 100 yesterday, closing 1/4p off at
364p.
Carlsberg also reported third-quarter results showing an 11 per cent fall in
nine-month operating profits and cut full-year guidance as BBH weighed on its
profitability.
FT Comment
* BBH, at about 20 per cent of profits, is a relatively small part of
Scottish & Newcastle, which has become a pure brewer after completing the
sale of its pubs this week. Nevertheless, it is the sexy growth end of the
business and if it starts to stall, the multiple of 11.5 times earnings -
based on 2004 pre-tax profit forecasts of Pounds 376m - could look stretched.
When Tony Froggatt, the new chief executive, presents his strategy in
December, he will have a hard job convincing investors there is life after
pubs. Lex, Page 18
[FTI [The Financial Times]] |
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