In an update for the nine months to September, Scottish & Newcastle says that Baltic Beverages (BBH), its 50% joint venture with Carlsberg, and its Asian businesses have continued to deliver strong growth.
Elsewhere, however, it has been tougher. Western European markets have been 'mixed' due to an overall weak consumer environment while in the UK, although it has continued to gain market share, the trading climate has been 'difficult'.
Scottish says that the UK beer market was weaker than expected in the third quarter, declining 6.7%. While this decline is partly due to stock overhang following the World Cup, the group reckons it is also indicative of 'a more depressed consumer environment'.
S&N total branded beer and cider volumes for the UK rose 0.6% in the third quarter, with the top four brands - Foster's, Kronenbourg 1664, John Smith's, Strongbow - performing ahead of this with volume growth of 2.0%. Strongbow put in a particularly good show.
The group cautioned that going into next year, it expects the introduction of the smoking ban in England and Wales will have an adverse effect on the market. While that, alongside continuing cost pressure - which it hopes to mitigate through cost cutting - will make life difficult, it still expects to continue outperforming the UK market overall.
Abroad, although Western European markets have continued to be challenging, it made 'good progress' across the majority of its other international markets.
In France the trading environment has improved in the off-trade, but the group warns the economic conditions and consumer confidence are still weak and it expect this to continue over the near future. Results are also being undermined by disruptions caused by recent restructuring of the wholesale business there.
In Belgium S&N's branded beer gained share in the on-trade but declined by more than the market in the off-trade due to a firmer pricing policy.
In Portugal branded beer volumes grew 7.1% and branded water volumes were flat in the third quarter, with pricing positive for both over the period.
In Finland, own branded volumes were down a hefty 8.7% over the quarter on continued decline in beer volumes due to the adoption of a 'very firm' pricing policy aimed at recovering some of the price declines of last year. Own branded volumes in all other sectors - water, cider and soft drinks - were up 8.2%, with pricing strong.
Its Asia joint ventures have continued to generate healthy growth, with United Breweries in India showing volume growth of 32.4% for the three months to September. In China, its joint venture with the Chongqing government has shown volume growth of 23.2% over the same period.
BBH, meanwhile, is scheduled to issue its results for the third quarter tomorrow. The group notes that in a trading update published on 26 September, BBH highlighted strong Russian volume growth of 16% in the months of July and August. That compares to market growth of 14% over the period.
Scottish is confident BBH will continue to perform strongly. As well as Russia, the joint venture's markets include Ukraine, Kazakhstan and the Baltic Countries of Latvia, Lithuania and Estonia.
Looking ahead, the group says that despite variable consumer markets in Western Europe and rising input costs, it is confident it will meet market expectations for the current 2006 year.
It warned however that it expects current trends in trading conditions and cost pressures to continue into 2007, with the UK business set to be adversely affected by the introduction of the smoking ban in England and Wales.
To help limit the damage, it plans to launch further, group wide cost saving programmes. These will be detailed in February.
Scottish assures shareholders that its focus on cash 'remains high' and that it remains confident of delivering further, sustained cash generation.
Overall, and despite its assurance that current full year targets will be met, today's statement can only be described as mixed, with the outlook for the UK in particular a concern.
The disappointment on the markets was palpable, as by midday the Scottish & Newcastle Group Plc shares were down a hefty 3.7% or 21p to 547.5p.
There was an element of profit taking after a very decent run recently, with the shares having gained 11.5% over the last six months to yesterday's close of 568.5p. Over calendar 2006, they have gained nearly 17%.
Based on consensus forecasts ahead of today's statement, at 547.5p, the shares trade on a forward 2006 PER of 15.6, falling to 14.5 in 2007. The prospective yield is just under 4%.
