Bloomberg News

Baltika Profit Rises 32% on Increased Russian Incomes

November 08, 2007

OAO Baltika Breweries, the Russian brewer whose joint owners are vying for full control of the company, said nine-month profit gained 32 percent after rising household incomes fueled sales of more expensive brands.

Net income climbed to 335 million euros ($490 million) in January through September from 254 million euros a year earlier, the St. Petersburg-based brewer said today in an e-mailed statement. Sales increased 32 percent to 1.76 billion euros.

``Baltika has once again shown growth in market share and a high level of financial results,'' Baltika President Anton Artemiev said in the statement.

Baltic Beverages Holdings AB, Baltika's parent company, yesterday reported an 18 percent gain in third-quarter profit. Baltika is the largest beer company in Russia, where the ninth- straight year of economic growth is boosting wages, enabling more consumers to purchase higher-priced brands. The country's warmest winter in a century also helped spur beer purchases this year.

BBH's joint owner Carlsberg A/S (CARLA) wants to gain full control and has teamed up with Heineken NV (HEIA) to offer 6.8 billion pounds ($14 billion) for its joint-venture partner Scottish & Newcastle Plc. The U.K. brewer rejected the bid and started arbitration aimed at forcing Carlsberg to give up its stake in BBH.

Baltika's nine-month earnings before interest and taxes climbed 29 percent to 450 million euros, the company said.

Increased Exports

Brews made under license such as Kronenbourg lager led revenue growth. Kronenbourg sales increased 2 1/2 times, purchases of Tuborg beer climbed by 79 percent, and sales under the Foster's brand rose 62 percent. Sales of the brewer's flagship Baltika beer, which Scottish & Newcastle is now making under license in Britain, advanced 35 percent.

Exports gained 19 percent, or 29 percent if sales under license are included, the company said. Baltika plans to further increase exports, mostly to the countries of the former Soviet Union, where the brand is best known, Vice President Yekaterina Azimina said on a conference call today.

Baltika spent 193 million euros in the first nine months building new plants and boosting the capacity of existing ones, Azimina said. The company will spend 18 million euros to double the capacity of its brewery in Voronezh from the current 2 million hectoliters by 2008, she said.

The brewer raised its market share to 37.7 percent in 2007's first nine months. Baltika increased its forecast for volume growth in the Russian market this year by 2 percentage points to between 13 percent and 15 percent. The market will continue to grow 3 to 5 percent a year in medium-term, the company said.

To contact the reporters on this story: Maria Ermakova in Moscow at mermakova@bloomberg.net; Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net.

To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net.


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