ST. PETERSBURG, 26 August, 2004 — Key results of the Company in the first half of 2004:

 

 

The new marketing strategy and balanced brand portfolio have allowed the Company to achieve one of its goals, i.e. to be the leader in all segments of the Russian beer market. In the second half of this year the Company is the leader in the premium and average price segments having the market shares of 22% and 30% respectively. The Company also continued to increase its share in the license and economy segments.  

 

Sales of the locomotive Baltika brand in the first half year went abreast with the market growth pace. Especially well selling were Baltika 0 (+25%) and Baltika 7 (+29%) compared to the same period in the previous year. Over 60% of sales of these brands were beer in cans which consume more material compared to other container types. This change reduced gross profitability by 2%.  

 

Representation of the Baltika brand in sales outlets exceeds 90% according to Business Analytica research agency. This is the best figures among trademarks of FMCG's companies in Russia.  

 

Sales of the premium brand Parnas were given a new impetus. Brand sales grew by 55% during the first half year.  

 

Of the Company's products, Carlsberg beer should be noted in the license segment. Robust support of the brand including promo actions and official Carlsberg sponsorship of the 2004 European football championship continued to raise sales — in the first half year sales grew 2.6 times compared to the same period in the previous year.  

 

In the main-stream segment, the niche of local brands proved to be the quickest growing, which is the most accurate index of consumer preferences in regions; this fact is confirmed by the high sales of brands Samara (+314%) and DV (+428%).  

 

The Company's investment priorities are the promotion of sales and distribution, along with an efficient cost management.  

 

Before the season began, the Company had supplied retail outlets with special branded equipment to promote its product to end consumers. Already in June Baltika Brewery has achieved the first position in Russia in the draught beer segment for selling over 70 thousand hl.  

 

The Company also develops logistical facilities — in the first half of the year warehousing terminals were put into operation in Ekaterinburg, Novosibirsk and Voronezh and a new terminal was built in Irkutsk.  

 

On 24 August, 2004, a modern malt production was put into operation with the annual capacity of 105,000 tons of malt. This is the Company's second investment project of such a scale. Unlike the first facility, built jointly with the French group Souffle, the malt production in Tula is an entirely independent project of the Company. Effects of the project will begin to be felt in the second half of 2004 including the expected decrease in material costs and the corresponding growth of gross margin by 1%.  

 

The active marketing program in the first half of the year caused the growth of advertising costs. This fact explains the insignificant decreasing of EBITDA margin (before depreciation, taxes and finance items). Nevertheless, the share of these costs remains at an average level in the industry; this will allow the Company in the future to involve additional investments into product advertising and promotion, if necessary.  

 

Main company's figures and ratios for the 1-H 2004  

(with regard to comparable data):  

 

* According to the Company's financial reports prepared under GAAP