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. Last Updated: 07/27/2016

Baltika Slashes 84% From Dividend




Russian No. 1 brewery Baltika has cut its interim dividend on ordinary shares by 84 percent in dollar terms, a decision analysts said the company was probably forced to make as it adjusts to increasing competition and smaller profits.


The board of directors at St. Petersburg-based Baltika announced this week a dividend payment of 25 rubles ($1) on common shares and 32.5 rubles ($1.30) on preferred shares. Last year, Baltika paid an interim dividend of 57 rubles ($9.50) on common shares and 74 rubles on preferred shares ($12).


No annual dividends were paid at the end of 1998 .


Baltika officials refused to explain why they decided to cut the dividends.


"Probably, they are spending a lot [of their profits] recapitalizing the company," said Margot Jacobs, a United Financial Group analyst who follows the retail sector.


Market experts said slimmer operating margins probably played a part in Baltika's decision. Margins have slipped from 45 percent last year to 30 percent at the start of 1999, according to the United Financial Group.


With the ruble's devaluation, beer prices have declined 56 percent in dollar terms since last year, according to Troika Dialog brokerage.


Even though Baltika increased output by 18.6 percent in the first half of 1999, its market share nevertheless has slid as new players have jumped on the bandwagon, analysts said.


South African Breweries has started producing its Golden Barrel brand in Kaluga and Turkish brewer Efes has opened lines of Old Miller and Efes. Bravo group has kicked off production of Bochkaryov, L?wenbrau and Yunkerskoye.


As a result, Baltika's share in the market fell from 22.8 percent at the start of the year to 18 percent this summer, according to the Moscow-based market-research company Business Analytica.


Estimates of another market-research company, A.C. Nielsen, suggest that Baltika has lost 2.5 percent of the Moscow market since last fall.


Baltika has been hit the hardest in its hometown of St. Petersburg, where its share declined 20 percent due to heavy competition from Stepan Razin brewery and Interbrew, according to Nielsen.


"This is a logical outcome due to the large number of new entries in the sector," said Maria Tarulina, retail analyst with Troika Dialog.


Baltika is not suffering alone, though. Other large, established producers have also been forced to share profits with newcomers. Sun Interbrew has increased output by only 17 percent this year compared with 31 percent for the whole brewing industry, Tarulina said.


Baltika officials disagree with the marketing results. The company said Thursday that its market share has increased to 15 percent from 14 percent last year. Baltika hopes 1999 sales will end up 30 percent on the previous year.