Estonia: Saku Õlletehase AS released its financial results of Q1 2006

Estonia’s largest brewery Saku Õlletehase AS said its beverage sales for the first quarter of 2006 totalled 15.48 million litres, 656,000 litres or 4.4% up on the corresponding period in 2005. Revenue amounted to EEK 125.1 million (€7.9 million), an EEK 15.6 million (€997,000) or 14.2% improvement compared to a year ago, the company released May 31.

The growth resulted, above all, from larger beer sales and a rise in profitability.

"Saku Õlletehase AS ended the first quarter with strong results: our beers expanded their market share and the company's profitability improved. We have succeeded in implementing our strategy through systematic enhancement of the product range and consistent reduction of the cost base. We have launched new and reduced the share of less profitable products and have rationalised our logistics structure," said Acting Chairman of the Management Board Janno Veskimäe in his commentary on the company's first quarter results.

Expenses for the quarter totalled EEK 113.7 million (€7.2 million), EEK 8.3 million (€531,000) or 7.9% up on the same period in 2005. Expenses have grown mainly on account of rising raw materials prices and changes in the product range which have resulted in additional expenses of EEK 2.1 million (€135,000). Transport expenses and the cost of other services purchased grew by EEK 654,000 (€41,000) and EEK 2.38 million (€154,000) respectively.

The period’s profit before tax amounted to EEK 11.9 million (€762,000), EEK 7.6 million (€483,000) or 2.7 times up on the corresponding period in 2005. The company will pay income tax of EEK 23.8 million (€1.5 million) on the dividends which will be distributed to shareholders.

According to the Estonian Breweries’ Association, in the first quarter of 2006 the Estonian beer market grew by 3% to 24.3 million litres. The market share of Saku Õlletehase AS grew by 1.7 percentage points to 45.6%, 7% up on a year ago, and the company retained its leading position.

In the category of beer, the market share of Saku Õlletehase AS increased primarily thanks to growth in the sales of quality beer, a development with a clearly positive impact on the Estonian beer culture and the quality of the Estonian beer market. Partly, the growth may be attributed to the continuing success of Saku Kuld which was launched in November 2005. To date, its sales surpass 1 million litres.

The growth in market share was also facilitated by a successful campaign arranged for Saku Rock, changes in the packaging of Saku Originaal and the entire Saku line, and the differentiation of the products from others available in the market. Sales of the leading international beer brand Carlsberg have also been increasing steadily. By the end of the first quarter of 2006, Carlsberg had a 23% share and second position in the premium beers segment, right after Saku Kuld whose share was 39%.

Although during the quarter the Estonian cider market grew by 9%, the share of Saku Õlletehase AS’ shrank by 3 percentage points. The decline resulted primarily from the company’s lesser activity in this category. In the first quarter of 2006, Saku Õlletehase AS launched annona-flavoured KISS Cariba. The company is going to focus on developing the cider category in the second and third quarters of the financial year. According to plan, exciting new ciders and cider mixes will be launched during the period beginning from May.

The Estonian long drink market grew by 42%; the share of Saku Õlletehase AS remained the same as it was a year ago – 25%. In the first quarter Saku Õlletehase AS launched two new products: cranberry-flavoured Magna in the economy class and Saku GIN Long Drink Tonic. As with cider, ambitious plans relate to the summer when the product range will be diversified through the launch of new flavours and packaging.

According to the information of Saku Õlletehase AS, in the first quarter the table water market grew by 8%, the share of flavoured waters increasing to 36% of the total (the highest figure in the Baltic region). Even though at 10% the market share of Saku Õlletehase AS remained similar to the one attained a year ago, the profitability of the portfolio improved on account of an increase in the share of the Vichy line.

The share capital of Saku Õlletehase AS amounts to EEK 80 million (€5.113 million) and is made up of 8 million ordinary shares with a par value of EEK 10 (€0.64) each. The shares have been fully paid for. In compliance with the Articles of Association, the minimum and maximum authorised share capital amount to 8 million shares, i.e. EEK 80 million (€5.113 million), and 31 million shares, i.e. EEK 320 million (€20.45 million), respectively. The number of shares issued did not change during the reporting period. Shareholders are entitled to receive dividends and have one vote per share at meetings of the company. On 28 March 2006 the general meeting approved the proposal of the management board to declare for 2005 a net dividend of EEK 80 million (€5.1 million), i.e. EEK 10 per share. The dividend will be paid out on 22 June 2006.

In the first quarter of 2006, Saku Õlletehase AS made two major changes to its product portfolio, discontinuing the distribution of Pepsi products and production of soft drinks (clear lemonades and kvass). The distribution of Pepsi products was terminated due to low profitability. The production of soft drinks was discontinued because the company intends to focus more on the production of other alcoholic beverages (cider and long drink) and to expand its market share in those categories.

A significant organisational change was the resignation of the Chairman of the Management Board Jaak Uus. Until a new chairman takes over, the Acting Chairman of the Management Board is Member of the Management Board Janno Veskimäe.

In the first quarter of 2006, Saku Õlletehase AS upgraded its logistics system with a view to improving its efficiency and rendering it more customer-friendly, and changed the transport service provider. In connection with the overhaul of the logistics system, all interim warehouses were eliminated: all orders are assembled and prepared for delivery on site.

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