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. Last Updated: 07/27/2016

Baltika's Profits Soar on Record H1 Sales

The country's top brewer, Baltika, said on Wednesday first-half profits grew by nearly half as rapid sales growth enabled it to strengthen its leading position in Russia's promising beer market.

Net profits rose 46.1 percent to 81 million euros ($99 million) on net sales of 450 million euros, which were up by 23.6 percent, Baltika said in a statement.

Baltika, jointly owned by Scottish & Newcastle and Carlsberg, sold 10.81 million hectoliters of beer, an increase of 22.1 percent, compared with overall market growth of 3.7 percent.

"The figures are very positive," said Metropol analyst Natalya Milchakova.

Milchakova said the results surpassed her expectations as Baltika sales expanded quicker than the overall market, whose growth has been slowing in the past year.

The Russian beer market, the fifth-biggest in the world, rose some 4 percent by volume in the first half of 2005, compared with 11 percent in the whole of 2004.

Baltika said it boosted its share of the Russian market by 3.6 percent to 24.1 percent, and made inroads into export markets such as Kazakhstan and Belarus.

Sales growth was the result of a new marketing strategy launched last year and hefty investment in new brands. Milchakova noted that Baltika had invested in both discount beer and licensed beer, such as Foster's.

Baltika said it managed to raise prices by 1.5 percent.

Milchakova also noted a fall in administrative expenses to 16.7 million euros from 17.2 million euros.

"The quality of finance management is good," she said.

Baltika said it was able to boost margins thanks to price increases and tight cost controls, which saw production outlays per hectoliter fall by 9.5 percent even as distribution costs rose.

Earnings before interest, taxation, depreciation and amortization rose 38 percent to 134 million euros, with the EBITDA margin rising to 29.7 percent from 26.6 percent.

The figures were based on International Financial Reporting Standards for the first time after a switch from U.S. Generally Accepted Accounting Principles.

Milchakova said Baltika's growth would continue due to rising sales. Unlike other breweries, which expand in Russia via acquisitions, Baltika raises production from its own facilities.