Russia: Baltika beer production stood at 28.2 million hl in January-September 2006

Baltika released November 13th the main financial results of the first 9 months of 2006 which are as follows:

Sales volume of all production - 28.6 million hectoliters
Net sales – EUR1.338 million
Gross profit - EUR727.4 million
EBITDA - EUR440.9 million
EBIT - EUR354.4 million

The basic results over the first 9 months of 2006 demonstrate undisputed leadership in the market and high financial performance.

At present the process of merging “Vena”, ”Pikra”, “Yarpivo” and “Baltika Breweries” has entered its final stage. For the first time the basic financial indicators and performance results are presented at the level of the Baltika Group as a whole and include the consolidated results of “Baltika Breweries”, “Vena”, “Pikra” and “Yarpivo.” The merger process is proceeding according to plan and its completion, as was announced previously, is expected by the end of 2006. Baltika Group is finishing up the integration of production, sales, distribution and administration. The merger confirms the position of “Baltika Breweries” as one of the largest FMCG companies in Russia and one of the largest breweries in the world. Now the significant positive financial effect of operational integration can be observed and the advantages of the merger can be noted earlier, than it has been forecasted.

The Russian market and the position of the merged company

As the results of the first 9 months of 2006 show, the merged “Baltika Breweries” is the undisputed leader on the Russian market with a share of 36.3%. The Company's volume over the first 9 months of the current year amounted to 28.6 million hectoliters, which signifies a growth of +8.5% relative to the same period in 2005. Beer volume came to 28.2 million hectoliters, a growth of +8.8%.

In the first 9 months of the current year, the Russian beer market grew by 9 %. Market showed particularly high growth (+14%) in Q306 due to a number of factors, including the situation on the market of strong drinks. In the same quarter, beer volume of the merged Baltika Group grew by 15.4% and a total of 11.6 million hectoliters of beer was sold. The Company's market share on the Q306 results was 37.2%.

Development of the Company's Brands

At the end of the first 9 months of 2006, the Company's brands occupied leading positions in all price segments of the market. Baltika and Arsenalnoye remain the most popular Russian brands.
As before, leadership in the licensed segment is held by the Tuborg brand, which at the end of the first 9 months grew by 130.2%. The Company's other licensed brands also showed excellent growth: Carlsberg (+38.4%), Foster's (+113.0%), Kronenbourg 1664 (+114.2%).
The market share of the merged company “Baltika Breweries” in the licensed segment amounted to 21.9%, having grown by 2.2% over the period.

Many other of the Company's brands were successful: Nevskoye (+35.3%), the regional brands Don (+27.1%), Leningradskoye (+48.3%) and Chelyabinskoye (+27.1%). The Company's market share in the premium segment increased to 43.9%.

Over the first 3 quarters, “Baltika Breweries” implemented a whole range of innovations:
Foster's in a 0.5 liter bottle with a pull-ring cap
Kronenbourg 1664 in a 0.46 liter bottle and the brand's move to twist-off caps
New licensed brand Tuborg Twist in a transparent bottle with NLL label and a pull-ring cap
Carlsberg in a new bottle with a bottom opener
New brand in the Baltika line-up - beer Baltika Cooler
Baltika N3 in a 1.0 liter PET bottle
New brand Bolshaya Kruzhka
Yarpivo brand in a 1.5 liter PET bottle
2.5 liter PET bottle for a group of brands - Аrsenalnoye, Kupecheskoye, DV and Uralsky Master among others
New mid-cone packaging for cans of the brands Baltika N3, Baltika N7 and Tuborg.

Sales Abroad

In Q306, the Company continued to develop export of its production successfully.
The volume of export sales of the merged Company over the first three quarters of 2006 amounted to 1.3 million hectoliters, + 12% by comparison with the same period a year earlier.
Taking into account the launch of licensed production of the Baltika brand by the Slavutich brewery in Ukraine at the start of 2006, sales volume of the Company's brands abroad grew by +27%.
Licensed production in Ukraine increased sales of the Baltika brand in that country by 17 % compared to the same period a year earlier.
The Company's share of total Russian beer exports is in excess of 80%. Now every eighth bottle of the Baltika brand is sold abroad.

Financial results summarized:
Gross Profit EUR727.4 million (+30.2%); Gross margin: 54.4% (+4.1pts); EBITDA Margin: 3.0% (+4.5pts); EBIT: EUR354.4 million (+45.8%); EBIT Margin: 26.5% (+4.6pts); Net Profit : EUR260.6 million (+34.8%) ; Net profit Margin: 19.5% (+2.1pts).

Anton Artemiev, President, has commented on the results as follows: “As we previously announced, the process of merging “Baltika”, “Vena”, “Pikra” and “Yarpivo” is proceeding successfully and completion is planned for the end of the current year. Today we are for the first time presenting our financial report and operational results for the first 9 months of the united “Baltika”. We have a lot to be proud of. This was not an easy period for all companies of the Group, but we have held onto our leadership positions and are twice as far ahead as our nearest competitor in terms of market share.”

Ever since 1996, “Baltika Breweries” has been the leader on the Russian beer market. Since 2004, “Baltika Breweries” has been in the process of merging with “Vena”, “Pikra” and “Yarpivo.” It is expected that the merger will be completed by the end of 2006. As a result of the merger, “Baltika Breweries” will own 10 breweries in 9 regions around Russia, will have the strongest portfolio of brands and will number around 12,000 employees.

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