In an update ahead of its interims on August 7, S&N says branded beer sales momentum continued over the period across the group despite challenging conditions in some of its markets.
For the UK it had already factored in a decline in beer sales against the boost received from the football World Cup last year. The recent poor weather, however, has exacerbated the decline, resulting in a hefty 5% drop in UK sales over the period. Despite this, all key brands - John Smith's, Foster's, Kronenbourg and San Miguel - have grown share in their respective markets.
It expects second half UK beer volume will be flat as comparatives improve and despite the potential impact of the smoking ban that has just come into force in England.
On a further downbeat note, the group says it continued to experience input cost pressures in the UK. Initiatives to shave £10m in costs over the second half to limit the impact are planned for the second half.
As a result of all these negative factors, it anticipates first half UK operating profit will be lower than last time, although it believes full year performance for the market will meet expectations.
The international division, meanwhile, continued to grow branded beers, particularly Sagres in Portugal and Newcastle Brown Ale in the US. Trading in the French wholesale business, however, remains 'extremely challenging' and addressing this weakness remains a key priority for management. A recently-resolved dispute at its Obernai plant following a shakeup of the French operations was also a drag during the first half.
Elsewhere, the group notably enjoyed double digit growth with the Kingfisher brand in India, and continues to build on last year's strong performance in China, where volumes grew by 29% over the first half.
Baltic Beverages Holding (BBH), its 50% joint venture with Carlsberg, remains leader in most of its markets, including Russia where the market has continued to benefit from an unseasonably mild winter. Within this growing market, the Baltika brand portfolio continues to outperform.
More broadly, S&N cautions financial expenses 'have been and will continue to be adversely affected by significant interest rate rises', as well as increasing investment levels in BBH.
The soothing comments on the full year outturn helped limit the impact of the rather mixed overview of first half performance, with Scottish & Newcastle Plc shares off just a penny to 631.5p late morning, giving a forward 2007 PER of 17, falling to 16 in 2008. The prospective yield is 3.5%.
