FOCUS- Hartwall surges as Russians rediscover beer
11:25 a.m. Jun 05, 1998 Eastern
By Paul Lonnfors
HELSINKI, June 5 (Reuters) - Finnish beverages group Hartwall on Friday
reported January-April profits doubling on a boom in beer sales in
Russia, and it predicted further strong growth despite the country's
economic turmoil.
Hartwall's profit before extras leapt to 144 million markka ($26.8
million) from 69.5 million a year ago, well above the range of analysts'
forecasts. Hartwall shares jumped 21 markka to 171 markka by the
afternoon on the Helsinki Stock Exchange.
Four-month operating profit was 150 million markka, up from 74 million,
as the contribution from Hartwall's joint venture Baltic Beverages
Holding (BBH) surged to 117.5 million markka from 53.4 million.
Norway's Orkla owns the other 50 percent of BBH, which runs nine
breweries in Russia, the Ukraine and the Baltic States.
''We expect strong growth to continue in Russia,'' CEO Jussi Lansio told
a news conference.
But he added: ''I think it is unlikely that the figures would double in
the next eight months as well.''
BBH is the beer market leader in Russia and the Baltic states and number
two in Ukraine, Hartwall said.
In Russia, growth was fuelled by Russian consumers choosing beer instead
of vodka, and BBH was meeting the demand, Lansio said.
Despite economic problems in Russia, consumer demand remained strong
since the official economy was suffering more than the huge grey sector
which does not show in economic data, but demand could suffer if Russia
experienced economic chaos for long, he said.
''Growth has been the strongest in Russia, where beer markets rose by
30-35 percent. In Estonia and Lithuania, growth exceeded 20 percent, and
in Latvia, growth was about 15 percent,'' Hartwall said. In the Ukraine,
the market grew 10 percent.
Russian beer consumption had plunged to 15 litres per capita per year
after the collapse of the Soviet union, and was now at 18 litres, well
off the 25-litre level during the late Soviet-era, he said.
Lansio said BBH's May sales also showed strong growth.
BBH's sales volume rose 72 percent in January-April to 229.5 million
litres, and its net sales rose 81 percent to 204 million markka.
The company has raised its forecast for output this year to 850-900
million litres from 800 million -- almost twice the total Finnish beer
market of some 450 million litres a year.
Although BBH's business had not been affected by the economic turmoil in
Russia, the group said it had raised its provision against possible
devaluations of the rouble and the Ukrainian hryvnia to 38 million
markka from 34 million.
''The provision would cover a rouble devaluation of about 25 percent,''
Hartwall's CFO Markku Siren said.
BBH would focus mainly on increasing production at its current breweries
in Russia, but was also looking at acquisition opportunities, Lansio
said.
Lansio said Hartwall was looking at the development in Belarus and other
areas of the former Soviet Union where operations have not yet been
possible.
''Competition has clearly increased but will not affect us this or next
year,'' Lansio said. ''We have a pretty good competitive edge, and it is
key to have large efficient units.''
In Hartwall's home market in Finland, its sales were falling, down 4.7
percent year-on-year to 112.8 million litres in January-April, while the
market for beer, mineral water and soft drinks grew 3.4 percent to 216
million litres.
Lansio said this was due to Hartwall's higher pricing strategy, and
competitors had followed its example in selling popular half-litre
bottles.
Hartwall's January-April domestic net sales rose 5.5 percent to 480
million markka although its share of the beverages market fell 4.3
percentage points to 50.3 percent. ($ - 5.372 Finnish Markka) |
