OREANDA-NEWS. On August 08, 2007 Baltika Breweries, the leading Russian beer company, announced its financial results for H1 2007, reported the press-centre of Baltika Breweries.

In the first half of 2007 total sales of the Company amounted to 21,8 mln hl (+29,6% compared to the same reporting period last year), beer sales grew by +30,0% up to 21,5 mln hl.

In Q2 2007 the Company’s sales came to 13,1 mln hl (+22,7% compared to the reporting period last year), and sales of beer were 12,9 mln hl (+23,3%).
 
In June 2007, publication of the Financial Times 500 top companies ranked Baltika Breweries as the leader of FMCG companies in Eastern Europe in terms of market capitalization. Compared to the previous year, Baltika’s market capitalization grew by 46,4% to $7,67 billion. In the list of the world’s 500 largest companies, Baltika’s ranking improved from 411th to 373rd position.
 
Anton Artemiev, President of Baltika Breweries commented: "Defying the unfavorable trends of rising input and distribution costs in H1 2007, the Company achieved strong financial results due to positive impact of operational leverage, performance of power brands and portfolio mix and final $20 million synergy effects from the merger. In H1 2007 the Company strengthened its leadership on the Russian beer market and widened its operations worldwide."

2. THE COMPANY STRENGTHENS ITS POSITION ON RUSSIAN AND WORLD MARKETS
According to the Company’s estimates, the growth of the Russian beer market in H1 2007 amounted to 22,7%. Unseasonably mild weather in the first quarter, positive shift in the structure of alcohol consumption related to the growing prosperity of the population, as well as consequences of alcoholic drinks issues caused by regulatory changes contributed to the beer market growth.
 
In H1 2007 Baltika Breweries grew ahead of the market and increased its market share up to 37,6% (+1,9%)
 
Also, in the first half of 2007 the Company was increasingly developing its export activities: Baltika went on sale in new foreign markets, including Switzerland, North Korea and Mexico, and beer deliveries to Mongolia were resumed.
 
In April 2007, a License Agreement was signed in Edinburgh providing for the production of Baltika №3 Classic beer in Great Britain. This is the first time that a Russian brand in the FMCG sector is being produced on a permanent basis in Western Europe.
 
The volume of export sales grew by +15% in H1 2007 compared to the same period last year and amounted to 0,9 mln hl. Including the licensed beer sales in Ukraine, the growth of sales abroad amounted to +25,2% compared to last year.
 
In June 2007 the Ministry of Economic Development and Trade of the Russian Federation awarded Baltika Breweries the title of "The Best Russian Exporter" for the sixth time for the outstanding contribution to the expansion of foreign economic relations and development of export.
 
3. DEVELOPMENT OF THE BRAND PORTFOLIO
In April 2007, Baltika brand was named on the list of the world’s largest brands compiled for the Financial Times newspaper by the market research company Millward Brown Optimor (МВО). Baltika received the highest rating for potential future growth and the brand’s contribution to Company profits among the international beer brands. 
 
In H1 2007 Baltika brand performed sales growth in Russia of +42,7%, it’s market share grew by +1,7% and amounted to 11,8% (according to the Company’s estimates).
 
The brand’s success was facilitated by innovations introduced in the first half of 2007:
restyling Baltika premium sub-brands (bottle with No Label Look (NLL));
restyling Baltika mainstream sub-brands (new glass bottle for Baltika’s key sub-brand - Baltika №3 Classic beer);
launch of  Baltika №3 Classic and Baltika №7 Export beer in l litre cans.
 
The new product varieties introduced in 2006, Baltika Cooler and Bolshaya Kruzhka, have also continued to improve their performance. According to Business Analytica data for May 2007, national distribution of Baltika Cooler reached 60%, with its share in the mainstream segment exceeding 7%, while national distribution of Bolshaya Kruzhka brand amounted to 52% and its market share in the low-price segment came to 12,6%.
 
Anton Artemiev, President of Baltika Breweries said: "In 2007 we focus our main efforts on Baltika brand. We believe that in the coming years Baltika brand will become the largest in Europe by volume."
 
In the licensed beer segment, sales of Tuborg grew by +106% in H1 2007, and the brand significantly strengthened its leadership in the segment, increasing its market share by +3,8% to 16,6% (according to data compiled by Business Analytica in June 2007). The Company’s other licensed brands demonstrated high growth trends - Carlsberg (+70%), Foster’s (+57%) and Kronenbourg 1664 (+221%). The Company carried out a restyling of the Foster’s brand and introduced Kronenbourg 1664 in an aluminium can.
 
Alongside the Baltika brand and the licensed beer brands, other Company brands also demonstrated excellent performance in H1 2007: the premium brand Nevskoye (+32%) as well as the regional brands Don (+40,5%) and Uralsky Master (+74%). New varieties of "live" beers were brought to market under the Arsenalnoye and regional brand labels.
 
4. BALTIKA CONTINUES TO INVEST IN THE COMPANY’S DEVELOPMENT
In the first half of 2007 Baltika Breweries’ investments amounted to 143 million Euros.
 
In March 2007 a new malt production facility was launched in Yaroslavl with capacity of more than 50,000 tonnes of malt per year. The Company also continued the successful implementation of its project for 3 times increasing production capacity at the brewery in Samara (from 2 to 6,5 mln hl per year) and the construction of a new brewery in Novosibirsk with rated capacity of 4,5 mln hl per year.
 
Essential part of Baltika Breweries investments in H1 2007 was made to introduce marketing innovations.
 
5. MARKET DEVELOPMENT FORECAST
Considering the expected lower market growth rates in H2 2007 we forecast the full-year market growth to be 11-13%. In the medium term we keep our market growth estimates of 3-5%.