OREANDA-NEWS. On 27 February 2009 Baltika Breweries, the leader on the Russian beer market, announced its financial results for 2008.

1. BALTIKA RELEASES STABLE FINANCIAL RESULTS

In 2008, Baltika Breweries demonstrated a high level of profitability and financial stability in the business despite rising costs of raw materials and packaging, an unprecedented increase in excise tax, unfavourable weather conditions and the situation on world financial markets.

The influence of negative factors could be evened out thanks to previously adopted measures to distribute production facilities around the country, due to own agricultural project, through measures for development of the Company’s leading brands and premiumisation of the portfolio, and by raising operating efficiency. All of this makes the Baltika business resilient and profitable.

Despite the deepening of the world financial crisis, in Q4 the Company delivered good results: sales volume in Q4 amounted to 9.4 mln hl, revenue increased by 11.8% and amounted to 19,644.4 mln rubles, and EBIT grew by 27.3% to 4,023.7 mln rubles.

In 2008, the sales volume of all the Company’s products amounted to 45.2 mln hl (+2.0% compared to 2007), and 44.5 mln hl of beer was sold (+1.8% compared to 2007).

2. BALTIKA STRENGTHENED ITS LEADERSHIP ON THE RUSSIAN BEER MARKET

According to Company estimates, in 2008 the volume of the Russian beer market was slightly lower than in 2007: the decline amounted to 0.4%.

The main negative factors were extremely unpropitious weather conditions in Q3, higher inflation in this beverage category than in previous years due to rising prices of basic raw materials and high growth of excise tax (by 32%), аs well as the consequences of the global crisis in Q4. All of this was reflected in the trend line of purchasing power of the population.

Against the background of a slight decline in the volume of the market in 2008, Baltika delivered growth in sales and increased its market share: at year’s end it stood at 38.3%, which is 0.7% greater than in 2007.

The volume of export sales in 2008 grew by +11.6% compared to the preceding year and came to 2.2 mln hl. The growth in export sales amounted to 16.8%, including licensed sales.

3. THE PORTFOLIO OF THE COMPANY’S BRANDS CONTINUES TO DEVELOP

In 2008, sales growth of the Baltika brand amounted to +14.5%, including growth of the premium variety Baltika №7 Export (+24%), Baltika Cooler (+22%), Baltika №3 Classic (+8%) and the new beer variety Baltika Lite. According to the Company’s estimates, in 2008 the Baltika brand’s share of the Russian market grew by +2% and amounted to 14.7%.

According to data from the international agencies Canadean and Euromonitor on the basis of its 2007 sales volume Baltika advanced to first place in Europe.

The Company has maintained its leadership in all price segments of the Russian beer market. The successful development of premium and licensed brands confirms the effectiveness of the strategy of Baltika Breweries with its focus on premiumisation of the portfolio.

Sales of the Tuborg brand — brand №1 in the licensed segment — grew in 2008 by +20.3%; its share in the segment increased by 2.7% and reached 20.9% in December according to Business Analytica agency.

The licensed brand Kronenbourg 1664 also reported good results, increasing sales by +35.4%. In July a new super premium beer variety called Kronenbourg 1664 Blanc was put into production and it became the most expensive brand in the Company’s portfolio. In addition, the line-up of licensed brands was extended with addition of the new licensed brand Asahi Super Dry.

4. BALTIKA CONTINUES TO INVEST IN GROWTH

In 2008, Baltika’s investments in the business amounted to around 11 bln rubles. The Company successfully integrated into its business new assets in Azerbaijan (the cost of the purchase amounted to circa 2.2 bln rubles).

Construction of a brewery in Novosibirsk, an increase in capacity at the brewery in Voronezh, as well as the purchase of the brewery in Azerbaijan were the culmination of a planned major phase of growth — building a geographically balanced production and logistics structure for the Company. Other investments remained at the previous level and were directed at implementing marketing innovations, raising the quality of products and ecological projects.

Anton Artemiev, President of Baltika Breweries: ‘In the context of a negative trend line on world financial markets, Baltika’s successful financial results for 2008 demonstrate clearly the resilience of the Company’s business, the level of professionalism of its employees and follow-through on a previously chosen strategy which has been successfully deployed for a number of years. On this basis, we confidently look upon 2009 as a year of new opportunities when the tough economic situation which awaits us offers us at the same time an additional major stimulus to find more effective ways of working and continuing to grow.’