Scottish & Newcastle, Britain’s biggest brewer, admitted yesterday that “stinking weather” in June and July had meant that it would struggle to meet its full-year trading targets.

The group, which owns such brands as John Smith’s and Kronenbourg 1664, said that it expected the wider beer market to decline by up to 2 per cent in the second half of the year, against its previous forecast that volumes would be level.

However, the company said that it still expected to outperform the market, as it did in the first half when its beer volumes fell by about 3 per cent compared to a market decline of 5 per cent, and it remained confident about prospects.

Ian McHoul, finance director, insisted that the downgrade was not a profit warning, saying that he expected analysts to cut their earnings forecasts from a consensus of 37.3p a share to about 36p. “We’re not flagging a major shartfall,” he said.

Tony Froggatt, chief executive, said: “Over the years we’ve seen good and bad weather and never really commented on it. Our policy has always been to manage our way through it. But sadly in the last couple of months we’ve had stinking weather, which has impacted trading.”

S&N also sounded a positive note on cider sales, despite two profit warnings in a month from C&C Group, the maker of Magners cider. John Dunsmore, managing director for Western Europe, said that volumes of its cider brands, led by Bulmers Original and Strongbow, were flat in July and he expected a full-year volume increase of about 20 per cent against a market up 15 per cent.

C&C suggested last week that its rival was building sales through discounting. Mr Dunsmore admitted that S&N offered a bigger margin to retailers and pub companies but said that had been been its strategy since it had launched Bulmers Original last year. “Some people have said we’re the Kwik Save to C&C’s Waitrose. I’d say we were more a Tesco to their Waitrose.”

He rejected recent suggestions by Paul Walsh, the Diageo chief executive, that the overice cider phenomenon was a passing fashion that eventually would go into reverse rather than remain a “sustainable proposition”. “Wouldn’t you say that if you weren’t in cider?” Mr Dunsmore asked, pointing out that unlike alco-pops produced by companies including Diageo, cider had a rich history and provenance. “There’s bound to be an element of high fashion in some of the sales, but we believe it can continue to grow.”

He revealed that S&N had launched trials of a new overice product called Strongbow Gold in eight continental cities, including Barcelona and Munich, where C&C is trialling Magners.

S&N, which faces a possible strike at its brewery in Reading over pay rates, reported a 5.5 per cent in comparable pretax profits to £191 million in the first half, from turnover 7.8 per cent ahead at £2.1 billion. Earnings per share rose by 5.6 per cent to 15.1p and the interim payout is up 2.5 per cent to 7.4p.

While its UK division suffered a margin decline on the back of higher input costs and the poor weather, the company was boosted by a 30 per cent volume increase from its Baltic Beverages Holding joint venture.

Shares of S&N reversed early losses, closing up 13½p at 505½p.

Ailing

5%

Fall in beer market volumes January to June 2007

17%

Fall in volumes in June

10%

Forecast fall in volumes for July

2%

Forecast Volume decline for July to December

Source: S&N estimates

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