Sales boom for BBH amidst takeover battle

By Neil Merrett

- Last updated on GMT

Related tags Bbh Russia Eastern europe

Increasing profitability within the beer markets of Eastern Europe
could further complicate the battle between Scottish &
Newcastle and Carlsberg for control of their regional joint venture
Baltic Beverages Holding (BBH).

BBH, which operates throughout Eastern Europe and Kazakhstan, yesterday posted a 28.3 per cent revenue hike to €878m for the three-month period ending 30 September.

Since 2003, BBH has been jointly owned by S&N and Carlsberg, which both hold an equal share in the venture.

Calrsberg last month announced it planned to take full control of BBH through a takeover of S&N.

The firm said it would join forces with competitor Heineken to buy out and split up S&N, with Calrsberg taking over BBH and Heineken left with the remaining assets.

Under the offer, S&N and its stake in Baltic Beverages would have been valued at £6.8bn (€9.7bn).

However, S&N rejected the bid outright and announced its own plan to keep its stake of BBH and replace Carlsberg with a new partner.

BBH's increased revenues, which were attributed in part to a 1.9 per cent gain it its share of the dynamic Russian market, will give further incentive to both owners to ensure they retain their operations in the region.

While opinion may be divided over the future for BBH's ownership, the brewer currently continues to dominate the beer markets of Russia and Ukraine.

Operating profit for the group was up by 24.7 per cent to €649m for the first three quarters of the fiscal year compared to the same period in 2006.

Despite operating margins falling by 2.6 percentage points to 29.6 per cent, due to increased commodity and expansion costs, the company said it was encouraged by the figures.

Alongside continued sales growth in the key markets of Russia and Ukraine, BBH said that sales volumes were improving in the less developed operations like Kazakhstan, Uzbekistan and Belarus.

Regional beer boom BBH was not the only brewer to profit from its operations in Eastern Europe.

Global rival InBev said Eastern Europe remained one of the key regional markets that had helped to offset the disappointing performance of its brands in Western Europe, with global revenues rising 4.8 per cent to €3.7bn during the third fiscal quarter.

According to the company, behind its Northern Latin American operations, Inbev's Central and Eastern European contributed the largest sales volumes of all its markets for the period, up 10.7 per cent to 15,133 hectolitres.

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