United Kingdom: Scottish & Newcastle’s trading has been in line with expectations

Scottish & Newcastle plc’s trading in the first four months of the year has been in line with company’s expectations for the Group as a whole. Whilst market conditions in the more developed markets, and in particular France, have been challenging this has been balanced by continuing business momentum in Russia, S&N’s Chairman, Sir Brian Stewart, stated at the Annual General Meeting on April 28.

The Chairman added: “The overall performance of the business and the benefits arising from our geographic scope and balance between more mature and faster growing markets gives us confidence that we should meet our financial and commercial objectives for 2005.”

S&N’s brands have outperformed the UK market since January, building on the trends established in 2004.

S&N’s beer and cider volumes are level and significantly ahead of the market, which is down by around 3 to 4%. This competitive performance has been due to momentum from S&N’s top four brands, Foster’s, Kronenbourg, John Smith’s, and Strongbow. The share gain achieved has not been at the expense of pricing (which is level on a net sales/hl basis) demonstrating the strength of S&N’s brand portfolio and good commercial discipline.

The Chairman stated: “Operationally, the £60m cost saving programme announced last year is progressing well, which should enable us to improve margins, as well as releasing additional funds for brand investment.

For the balance of 2005, we believe our UK business is well positioned to continue its good competitive performance and reach its financial and commercial goals.

Most beer markets in Western Europe have been adversely affected by continuing low levels of consumer confidence.

In France, the trends established in 2004 of around 5% market volume decline have continued due to low levels of consumer activity and the shift to discount supermarkets and the consequent growth in own label beer volumes. Within this difficult market Kronenbourg has confirmed its focus on developing its premium brands and increased pricing in early March. In Belgium, the domestic market has been weak, and in response our business has initiated a major restructuring of its operations. In Portugal, the business continues to perform well, led by the Sagres brand. In Finland, we have maintained our price positions, and as a consequence lost some share in a market characterised by heavy discounting in the first part of the year.

For the balance of 2005, we remain cautious on the prospects for volume due to continuing low levels of consumer confidence. In this context our strong market positions, strong brands, and improving efficiency will be critical in maintaining profitability.

Eastern Europe (Baltic Beverages Holding)
The results for the first quarter of 2005 will be announced on May 10. The full year results for 2004 were published on February 15, and showed beer volume growth of 18%, and turnover growth (in US dollars) of 30%. BBH’s most important markets Russia and the Ukraine continue to demonstrate robust growth.

The momentum established by the business in Russia in 2004 is continuing and BBH remains confident that it is well positioned for good volume and profit growth in 2005.

United States
Our business in the United States grew strongly in the first part of the year based on high levels of consumer demand and expanding distribution for Newcastle Brown Ale, which is gaining ground in the premium export sector.

For 2005 and beyond we see continued opportunities for valuable growth for the brand in this market.

Asia
We continue to make good progress in India and China, where business performance at United Breweries and Chongqing are benefiting from the fast growth in their respective markets. The successful completion of our investment in United Breweries in India is imminent.”

Scottish & Newcastle is an international brewing company with market leading positions in 15 European countries. S&N has three brands in the top ten of Europe in Baltika, Kronenbourg and Foster’s. S&N has an interest in 50 breweries worldwide and has sales of over 50m hectolitres per annum.

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