Carlsberg's Unchanged Full-Year Goal Disappoints As Volume Sags
Danish brewer Carlsberg A/S disappointed investors by leaving its full-year profit forecast unchanged after reporting first-half earnings that clearly beat estimates.
The shares fell as much as 2.5% in Copenhagen as the Tuborg-maker said that it still anticipates mid-single-digit organic growth in earnings, implying a much weaker second half. Operating profit rose 15% in the first half, as bigger-than-expected cost savings offset sliding beer volumes in Eastern Europe.
'The unchanged guidance looks conservative to us,' Jefferies analyst Ed Mundy wrote in a note. First-half earnings per share beat his estimate by 12%.
The main area of concern was Eastern Europe, where the volume of beer sold declined about 13% in the quarter, compared with analyst estimates for a 4.2% drop. Carlsberg is the biggest brewer in Russia, where its share of the plastic-bottle beer market declined 5%, as competitors lowered prices, chief executive officer Cees ’t Hart said on a call.
The brewer left its full-year forecast unchanged, as it sees “tough comparatives in Eastern Europe in the third quarter, poor weather at the beginning of the third quarter in Northern Europe,” and higher costs related to its turnaround programme, chief financial officer Heine Dalsgaard said on the call.
First-half earnings before interest, taxes and one-time items rose 20%, to 4.13 billion kroner ($652 million), beating estimates of 3.82 billion kroner.
Carlsberg is aiming to cut as much as 2 billion kroner of costs by the end of this year, to defend against an enlarged and more profitable rival, following the combination of Anheuser-Busch InBev NV and SABMiller Plc. Earlier this month, AB InBev merged its Russia and Ukraine business with that of Turkey’s Anadolu Efes, heaping pressure on Carlsberg’s operations in Russia, where the Danish brewer controls more than a third of beer sales.
“The cost savings are coming through. We’re driving down overhead costs and supply-chain efficiencies,” Dalsgaard said.
Sales rose 2% on a basis that excludes currency and acquisition effects. Analysts predicted organic growth of 3.2%. Carlsberg also reduced its forecast for gains from currency shifts to 50 million kroner from 300 million kroner. The company cut its debt by 14%, to 21.9 billion kroner.