S&N to lose £10m from smoking ban

The UK's biggest brewer, Scottish & Newcastle, has warned that the extension of the smoking ban will wipe £10m off its profits as the UK pub market declines by as much as 5 per cent this year.

S&N said it aims to make £50m in cost savings as part of an efficiency drive over the next three years and could not rule out the possibility of job cuts in both its UK and international operations.

The English ban, which comes into effect on 1 July, is expected to hit sales across bars and pubs as smokers stay away and buy cheaper drinks from supermarkets. Analysts said the expected downturn in sales at S&N could outweigh expected cost savings.

The news came as the group, whose brands include Foster's, Kronenbourg, Strongbow and Baltika, Russia's top-selling beer, reported a 13.9 per cent rise in pre-tax profits, driven by strong global growth. Profits for 2006 reached £452m; the group saw an 8.9 per cent rise in net sales.

The brewer has recently launched a series of new drinks, including Foster's Twist, a citrus-flavoured lager, and the cider brands Bulmers Original, Strongbow Sirrus and Jacques.

Sam Hart, an analyst at Charles Stanley, said growth in the UK was being driven by cider sales. S&N also saw a third consecutive year of increases in its market share for beer in the UK, with its main brands all gaining ground.

The company offloaded its real ale Courage for £10m in January but it insisted yesterday that it remains committed to John Smith's.

S&N also announced it has signed an agreement with Vietnam's state-owned Vinataba group, giving it a foothold in the country's fast-growing beer market.