Brewing giant S&N announces 11% profits rise

Brewing giant Scottish & Newcastle today announced an 11% rise in underlying profits after benefiting from a strong trading performance in the UK.

The group said sales volumes of its top four brands – Foster’s, Kronenbourg 1664, John Smith’s and Strongbow rose by 4.5% in the UK and pushed operating profits from its biggest region up by 11% on a year earlier.

S&N also owns the Beamish Irish Stout brand, based in Cork.

Overall, group profits before one-off items were in line with market hopes at £373m (€538m), compared with the £336m (€485m) seen in 2003. When including the sale of 1,400 pubs in 2003, profits were down on £471m (€679.8m) previously.

Chief executive Tony Froggatt said the company made “very good progress” in 2004, helped by efforts to improve efficiency and investment in its brands.

S&N, which accounts for 27% of the beer market in the UK, said improved service and brand strength enabled sales in pubs and bars to hold steady, against a 1.7% decline reported for the rest of the market.

In the off-licence sector, growth of 3.1% was slightly behind the sector as S&N said it chose not to discount as heavily as some competitors. Average beer and cider prices rose by 1% during the period.

Changes to wholesaling activities meant turnover in the UK remained constant at £2.68bn (€3.9bn), while operating profits rose to £176m (€254m) following efficiency improvements as S&N focused on production and its supply chain. It also announced the closure of historic breweries at Edinburgh and Newcastle.

The company said its international business overcame weak economic conditions in western Europe to post a 1.1% rise in operating profits at £189m (€272.7m).

The improvement was achieved despite a weak performance in France, where beer volumes declined by 4.9% following poor summer weather.

However, Newcastle Brown Ale continued to prove popular in the United States as the product recorded its tenth successive year of double digit sales growth - up 10.5% ahead of the imported beer sector which was broadly level.

Looking ahead, S&N said trading in all its major markets had been in line with recent trends.