S&N sees further growth in Russian business

Scottish & Newcastle (S&N) today said it believes there is considerably more growth to come from Russia's beer market.

Announcing third quarter results for its Baltic Beverage Holdings (BBH) joint venture with Carlsberg, S&N said there was "still ample scope for volume uplift in the Russian market", while other eastern European markets such as the Ukraine and Kazakhstan would become important growth driver as these countries developed.

S&N said net sales for the third quarter rose 28.3 per cent to €878m (£614m), with overall beer growth of 15 per cent on the previous period. Earnings before interest, tax, depreciation and amortisation rose 10.5 per cent to €274m (£192m).

The brewer said the Russian beer market had seen growth of 17.3 per cent for the first nine months of 2007, although BBH's overall margins were slightly below the previous period due to rising input costs.

"In terms of EBIT margin, the combination of positive pricing, operating leverage and the benefits of a fully integrated business in Russia should mitigate the near term impact of rising input costs and relatively stronger sales growth in less established markets," it added.

S&N will be hoping that the results strengthen its hand in defending its independence in the face of bid interest from Carlsberg and Heineken, who jointly launched a £68bn approach for the company a fortnight ago.

The UK brewer sees BBH as the 'jewel' in its own corporate crown, as does Carlsberg, and the growth potential of the Russian and affiliated beer markets will only serve to strengthen its resolve not to give up its 50 per cent interest in BBH cheaply - or at all.