Brewing giant Scottish & Newcastle refused on August 3 to rule out further job losses as the company seeks to trim (pounds) 60m of costs from its UK business by 2006. Reporting an 8% rise in underlying first-half profits to (pounds) 158m, the Edinburgh-based group pledged it would talk to employees before taking the axe to its staff roster again as it looks to meet the higher cost savings target. The group had previously aimed to save (pounds) 45m.

S&N declined to say where the additional saving would be found but John Dunsmore, managing director of UK beer business Scottish Courage, said: "I'm not ruling out job cuts."

The company is already under pressure from trade unions over the closure of the historic Fountainbridge brewery in Edinburgh and the relocation of Newcastle's Tyne brewery, decisions which saw around 300 staff from S&N's 7000-strong UK workforce lose out.


Following the restructuring, S&N said its UK operation had performed "particularly well" with sales of the big four brands - Foster's, John Smith's, Kronenbourg 1664 and Strongbow - showing a 9% increase by volume.

Scottish Courage saw comparable beer volumes grow 3.5% compared with a total beer market growth of 2.5% in the same six-month period as S&N increased marketing investment in its key brands by 12%. For the full year, the company is forecasting advertising and promotional investment will rise by the equivalent of 1.5% of net sales.

The UK division saw further improvements to operational efficiency, including savings from the group's purchase and integration of cider-maker Bulmer's.

Tony Froggatt, S&N's chief executive, said: "The good performance in the first half of 2004 gives us confidence that we will meet our financial and commercial objectives for the full year."

Full-year operating profit in the UK is expected to be slightly ahead of the comparable period in 2003 despite soft trading in July following off-trade promotions during June relating to the Euro 2004 football championship.

S&N's international division increased underlying profits by 4% to (pounds) 101m. The unit sells Kronenbourg in France, Alken-Maes in Belgium, Hartwall in Finland, Mythos Breweries in Greece and Central de Cervejas in Portugal.

The US business saw 10% volume growth for Newcastle Brown Ale, selling the equivalent of 100 million pints during the period. S&N also has a 50/50 joint venture with Carlsberg in the shape of eastern Europe's BBH and joint ventures in India and China.

The group said its international business performed well despite weak economic conditions across western Europe and cooler summer weather than last year, with premium brands continuing to grow well and overall beer volumes increasing 1.1%.

Some City analysts quest-ioned why S&N seemed unable to drive positive perform-ance from both its domestic and international divisions at the same time. While the UK unit improved during the first six months of 2004, this was offset by weaker trading elsewhere in Western Europe.

James Dawson, drinks analyst at broker Charles Stanley, said: "We were encouraged that the UK division managed to deal more effectively with the UK off-trade competitiveness, although the tough trading conditions in western Europe appear as competitive as ever and even a very strong market position in Russia does not preclude S&N from significant competition."

Shareholders will receive an interim dividend of 6.87p a share, up 2.5% from the same period last year. S&N shares closed 11p higher at 412.25p.

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