Carlsberg sees return to growth for Russian beer sales

May 9, 2012 9:59 AM EDT | By Mette Fraende and Teis Jensen
Carlsberg beer
Carlsberg beer (Photo: Reuters)

Danish brewer Carlsberg renewed hopes for a recovery in its crucial Russian beer market on Wednesday, after the first quarter of the year saw a rise in its market share, sending its shares up over 3 percent.

Carlsberg failed to meet first-quarter profit forecasts after the Russian market was hit by beer tax hikes but reiterated it expected the market to return to modest growth this year after a 3 percent decline in 2011 as consumers who stocked up ahead of the tax rises get buying again.

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The world's fourth-largest brewer, whose brands include Carlsberg, Tuborg and Baltika, said its beer volumes declined by 4 percent overall in the first quarter due to falling East European volumes while Northern and Western Europe saw growth.

The brewer's Russian market share by volume rose to 37 percent in the first quarter from 36.8 percent in the previous period. The Russian beer market earns the Copenhagen-based group nearly half its profits.

"It is very positive that they keep their 2012 guidance," said Banknordic portfolio manager Niels-Henrik Moller.

"Of course Russia is a problem but sales in Russia will get going again and Carlsberg sees positive trends in the country," Moller said.

Carlsberg shares were up 3.5 percent at 488.50 crowns by 0900 GMT, outperforming a 0.6 percent fall in the STOXX Europe 600 food and beverage index as the rising Russia market share took the focus away from the weak first-quarter result.

Its shares also went against a 1.2 percent fall in the Copenhagen Stock Exchange's benchmark index

"Consumer dynamics overall are positive in Russia. The underlying market seems ... very positive," Chief Executive Jorgen Buhl Rasmussen told a webcast.

"I would not confirm that we are now on a growing trend again, but ... I would be very surprised and very disappointed if we do not end up in 2012 with a higher market share than at end 2011," Rasmussen said.

MISSING FORECASTS

Carlsberg's first-quarter operating profit dropped 43 percent to 574 billion Danish crowns ($100.32 billion), missing an average 823 million forecast in a Reuters poll of analysts.

Group sales rose to 12.87 billion crowns in the quarter from 12.53 billion a year earlier, just ahead of the average forecast of 12.44 billion given by analysts in the poll.

"It is a weak result in Eastern Europe driven by destocking in Russia," said Jyske Bank analyst Jens Thomsen. "The market expected it would be weak, but this was even weaker than expected."

"The positive is that they are stabilising their market share in Russia," Thomsen added.

At the beginning of the year Russian taxes on beer rose by 20 percent but consumers stocked up ahead of the increase.

Also marketing costs had weighed heavily in the first quarter, as the group builds up to the European football championships this summer through promotional activities in shops, as well as marketing campaigns.

TOUGH COMPETITION

Carlsberg warned in February its profits would stall as Europe struggles to emerge from sluggish growth and competition is tough in more mature markets.

Big brewers are relying on emerging market growth and price rises to offset those factors.

While some rivals such as SABMiller Plc have seen emerging markets like Africa and Latin America offset a slow Europe, Carlsberg is heavily exposed to Eastern Europe and Russia, where growth has stalled.

The group's beer volumes grew 2 percent when adjusted for Russian destocking after the tax hikes.

For the full year 2012 Carlsberg said it still expected operating profit before special items to be at the same level as in 2011, which was 9.82 billion crowns.

Carlsberg also said it expected 2012 adjusted net profit to rise slightly from last year's 5.2 billion crowns.

"Our Q1 results were in line with our plans and we are on track to meet our 2012 expectations," Rasmussen said.  



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