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Beerworkers Archive

Post date: 05/12/2014 - 18:14

DENMARK: Carlsberg warns of a tough 2014

Q1 adjusted net losses total DKK67m (US$12.5m) versus net profits of DKK62m a year earlier
Net sales in three months to end of March inch up by 1.5% to DKK12.90bn
Operating profits fall by 27.9% to DKK453m
Volumes slip by 3.2%

Q1 adjusted net losses total DKK67m (US$12.5m) versus net profits of DKK62m a year earlier
Net sales in three months to end of March inch up by 1.5% to DKK12.90bn
Operating profits fall by 27.9% to DKK453m
Volumes slip by 3.2%

Carlsberg has seen the first quarter of 2014 perform "in line with our expectations", but has warned that reported profits in the full year will be hit by "a more uncertain macro situation in Russia and Ukraine".

The company reported on May 7 that net sales in the three months to the end of March rose slightly, by 1.5%. Volumes, however, dipped by 3.2%, resulting in a rise in organic price/mix for the quarter of 5%.

Net profits of DKK62m (US$11.6m) in the corresponding period a year earlier turned to net losses of DKK67m, while operating profits were down by 28%. Carlsberg blamed the fall on "the negative currency impact (-14%) and phasing of un-allocated costs" in the quarter.

"In the traditionally small first quarter, the group delivered organic performance in line with our expectations," said CEO Jørgen Buhl Rasmussen. "The Western European business continued its strong performance while results in Eastern Europe were impacted by the uncertain macro situation.

"In Asia, underlying volumes grew by low-single-digit percentages and our premium portfolio continued to perform strongly, driven by growth and share gains in the premium segment."

Looking forward, the brewer maintained its full-year outlook of operating profits growth in the high single-digit area in organic terms, but warned that reported results will be hit "more negatively by currencies than previously anticipated".

Carlsberg's share price fell sharply on May 7 after the results were released, before recovering slightly. At 1134 CEST, they were 0.9% down at DKK530.

Danish brewer's results by region and brand:


Western Europe - Sales +2.1% to DKK7.64bn, operating profits +8% to DKK440m

While the region's beer markets overall fell back by around 1%, Carlsberg made gains in Poland, Greece and Portugal. Group volumes rose by 3% in organic terms, but were held back by "the later sell-in to Easter" in the Nordics and the UK. De-stocking in France in the year-prior quarter boosted volumes this quarter.

Eastern Europe - Sales -14.4% to DKK2.48bn, operating profits -110% to loss of DKK8m

Yet again, Russia provided a headache for Carlsberg: The country's overall beer market fell by 5% in Q1, thanks to "the final year-on-year impact from kiosk closures, the uncertain macro environment and weaker economic growth". However, the company increased its market share by 20 basis points to 38.4%.

Ukraine's total beer market was also down, by mid single-digits, despite better weather conditions this quarter. While the country is in the grip of political unrest, Carlsberg said it "has been operating with very limited disruption and we have been able to produce, sell and distribute our products across the country". The company noted that the authorities increased excise duties on beer by 43% on 1 May. "This will require a consumer price increase of approximately 5% to 6%," according to Carlsberg.

A negative currency impact of -18% hit reported sales in the region as a whole, while profits were hit by "the negative operational leverage in our fixed cost base in a seasonally small quarter".

Asia - Sales +20.1% to DKK2.73bn, operating profits -5% to DKK455m

While the region delivered growth in sales and volumes in the quarter, Vietnam and China's Xinjiang province were flagged as having struggled, due to the economic slowdown and poor weather, respectively.

While total volumes fell back by 5%, the addition of acquisitions (China's Chongqing Brewery in particular) saw reported sales rise by 17%.

India, Laos and Cambodia performed well, while Carlsberg's "international premium portfolio" delivered growth in China and India. However, the currency impact from Malaysia, Malawi, Laos and India dragged on sales in the quarter.

The fall in profits was a result of "our decision to invest in the Asian growth opportunities, such as the establishment of our business in Myanmar and increased marketing investments behind our premium brands".


Brand Carlsberg saw sales rise by 2% in its "premium markets", with the brewer activating the brand's English Premier League sponsorship in 58 markets in Q1.

Tuborg delivered a 21% leap in sales thanks predominantly to China and India.

Kronenbourg 1664 had "a good start" to the year as it cycled easy comparatives: De-stocking in France in the prior-year quarter gave the brand little to worry about in Q1.

Somersby cider was the star performer, with sales leaping by 85%. "For two years in a row now, the brand has been the fastest growing global cider brand," Carlsberg said. Poland was singled out for its "continued positive performance", while line extensions in established markets also helped.

Grimbergen continues to hold the accolade of "fastest growing international abbey beer", according to the company. The Belgian abbey ale is now available in 33 markets.