Russia & Baltics: BBH beer volumes continued to grow in double digits rate in Q3 2005

Scottish & Newcastle announced on November 8 third quarter results (July to September 2005) from its 50% owned joint venture Baltic Beverages Holding AB (BBH). S&N posted 10% beer volume growth for BBH. Net sales up 21%(EUR). EBITDA up 15%(EUR). Russian market share up 1.0%pt to 36.9%.

3Q04 and 9M04 comparatives have been adjusted for the impact of the change to International Financial Reporting Standards (IFRS). BBH remains confident in the growth prospects for its markets, and anticipates continued profitable volume growth in the fourth quarter.

BBH beer volumes continued to grow in double digits rate in the third quarter and again grew significantly ahead of the Russian market. The full year Russian market volume growth forecast is 4-5%.

In the third quarter, BBH’s market share in Russia grew by 1.0%point to 36.9% compared to the third quarter of 2004. For the nine month period January to September market share was 2.9% points higher at 36.5%. BBH continued to lead the Russian beer market in the quarter improving further on the very strong first half performance.

In Ukraine, BBH’s third quarter domestic volumes grew by +25% showing a reversal of the negative performance in the first half. For the nine months to September volumes grew by 9% but market share declined to 19.4%, 4.3% points lower than in the previous year. Ukraine continues to be a very vibrant market, volume +24% for 9 months, and BBH is committed to improving its position.

In the Baltics, BBH’s third quarter domestic volumes were up +7%, a very strong performance in relatively mature markets. For the 9 months volume growth is now +6%. Market share was improved significantly in Estonia; however some share loss in Latvia and Lithuania lead to overall a slight reduction in market share of 0.5% points to 42.3%. Profits have grown well across the region over the period and BBH is confident for future progress.

Kazakhstan continues to be a source of very impressive volume growth, +53% for the nine months. BBH has now gained 2.9%pts of market share this year and with plans to double capacity in 2006 announced, the business is in a good position to develop further.

Pricing across BBH grew by 8.7% in local currency for the 9 months ending September. This is ahead of the trend reported for 1H05 showing the continuation of a positive pricing strategy. Sales mix was slightly negative due to the strong growth in the lower market segments.

BBH’s margins are ahead for the 9 months, +0.4%points, driven by price increases and operational gearing. This is a strong result given the pressure on input and distribution costs, which will continue in the fourth quarter and into 2006.

In line with the nine months trend we are expecting full year margins to be slightly up year on year.

Russian integration project
BBH remains confident of achieving the integration of its Russian operations and that it will deliver clear benefits to all shareholders. Communication to shareholders is in progress and independent valuations of all businesses will be presented to shareholders in due course. In the mean time project teams focused on sharing best practice continue to work in parallel to the legal integration process.

Currency
For the nine months to September the rouble has appreciated by 2.7% against the US Dollar and by 0.1% against the euro, (compared with the average exchange rates for the similar period in 2004).

Baltic Beverages Holding is a 50:50 joint venture between Scottish & Newcastle plc and Carlsberg Breweries A/S. It operates in six countries in Eastern Europe, including Russia where it is the market leader with a 36% market share.

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