Little cheer in drinks results: Declining sales and difficult markets keep analysts' forecasts low

GRAND Metropolitan, Vaux and Greenalls open the drinks sector's results season this week, against the background of weak share prices, declining beer sales at home and difficult markets abroad.

Grand Met's shares have had an uncomfortable time since last summer when the company warned that its Green Giant food business in the US had been hit by bumper harvests.

These problems are expected to have held back profits before tax for the six months to March, due on Thursday, to pounds 400m, compared with profits of pounds 394m last time.

More than half of its operating profits come from IDV, its international drinks company, where the biggest success story is J&B, the blended Scotch that is breathing heavily down the neck of the industry's number one - Johnnie Walker Red Label, part of the Guinness stable.

Most companies with exposure to the UK beer market will report a further decline in consumption in pubs over the six months to March, despite a reasonable recovery in consumption over the Christmas period.

Vaux, however, will probably report an increase in beer profits, aided by its pub acquisitions. The company's Swallow hotels operation, however, will almost certainly have soaked up most of the gains that have been made on the beer side.

Group pre-tax profits, excluding exceptional gains, are expected to rise by little more than 4 per cent to pounds 9.6m for the half-year to March.

Vaux's shares are also one of the few in the sector to sport a premium rating, standing on a prospective p/e for 1993 of more than 16.

Interim figures a day later from Greenalls are also expected to show improved returns from pubs and restaurants.

An anticipated 11 per cent profits increase to pounds 26.5m, however, will include a big benefit from lower interest charges arising from the company's rights issue last year.

Share prices in the sector are close to their 10-year low against the rest of the market.