Estonia: Saku Õlletehase’s Q1 operating profit more than doubles

In the first quarter of 2007 Saku Õlletehase AS sold 21 million litres of beverages, a notable 6 million litres or 33% up on the same period in 2006, according to company’s press release, May 30.

Commenting on the strong sales results Chairman of the Management Board Ireneusz Smaga said that in addition to the excellent performance of its well-known products, in 2007 Saku has launched 8 product innovations most of which have been warmly received. “Sales of special beer Saku Abbey which was launched in January surpassed our expectations and the exclusive can of Saku Kuld which was launched at the beginning of the year also became an instant success – sales exceeded the forecast two times. Other successful products include our classical cocktail line SIN which was supplemented at the beginning of the year with two new flavours, pomegranate flavoured DLight and KISS Spritzer Rosé,” remarked Smaga. “Distribution of the products of the Finnish beverage producer Sinebrychoff has also improved our results,” he added.

Revenue for the first quarter amounted to EEK 181 million (€12 million), EEK 56 million (€3.6 million) or 44% up on the first three months of 2006.

The largest, i.e., more than two-fold year-on-year growth was attained in the sales of table water which surged to EEK 11 million (€0.7 million). Year-on-year sales of other alcoholic beverages doubled to EEK 30 million (€2 million) and year-on-year beer sales grew by 34% to EEK 135 million (€8.6 million). Compared to the first quarter of 2006, domestic sales improved by 38% to EEK 155 million (€10 million) and exports expanded almost two-fold to EEK 26 million (€1.6 million). The main export markets were Finland, Sweden, Denmark, Latvia, Lithuania and Ukraine.

Expenses of the period totalled EEK 157 million (€10 million), EEK 41 million (€2.7 million) or 35% up on the first quarter of 2006. Variable costs increased on account of larger sales, growth in advertising expenses and an inflation-related rise in wages and salaries.

The period’s profit before tax amounted to EEK 25 million (€1.5 million), an EEK 15 million (€0.9 million), i.e., 2.5-fold increase on quarter 1, 2006.

The general meeting which convened on 28 March 2007 approved the proposal of the management board to distribute for 2006 a net dividend of EEK 200 million (€12.8 million), i.e., EEK 25 (€1.6) per share. The dividends were paid out on 20 April 2007 and the distribution gave rise to income tax expense of EEK 56 million (€3.6 million). As a result, the first quarter of 2007 ended in a loss of EEK 31 million (€2 million).

At 31 March 2007 the equity of Saku Õlletehase AS amounted to EEK 202 million (€13 million), EEK 99 million (€6 million) less than a year ago.

The market

According to the Estonian Breweries’ Association, in the first three months of 2007, the Estonian beer market expanded by 5.4% to 26 million litres. Saku Õlletehase AS holds the leading position with a 47% market share. Similarly to the prior year, our main efforts are directed at developing the premium and mainstream segments. In the beer segment, the first quarter of 2007 was a period of major product innovations. We launched special beer Saku Abbey and beer drink DLight Pomegranate and new packaging for Saku Kuld and Carlsberg.

According to marketing research company ACNielsen, compared to the first quarter of 2006 the Estonian cider market grew by 13.4% to 0.8 million litres. The market share of Saku Õlletehase AS was 44.8%. In the first quarter of 2007 we supplemented our KISS line with rosé fruit wine flavoured KISS Spritzer Rosé.

The long drink market grew by 36% to approximately 3 million litres. Our share of the long drink market was 30%. We supplemented our classical cocktail line SIN with club drinks SIN Mojito and SIN Cosmopolitan which helped us gain the leading position in the premium long drink market with a 32.5% share.

In the first three months of 2007 the Estonian water market expanded by 24% to 12 million litres. The share of Saku Õlletehase AS was 13.4% while in the higher than average price segment our share was 50.6%. In March 2007 we launched Vichy Ice Tea which contains the extract of Ceylon tea and natural juices. Vichy Ice Tea is available in two flavours – classical lemon and peach.

Organisational changes

In the first quarter of 2007 the Chief Financial Officer changed. After the resignation of Janno Veskimäe on 19 February 2007 the position was taken over by Inga Kuusik.

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