E-Malt.com News article: 4280

Denmark: Danish brewing giant, Carlsberg A/S, gave an uninspiring 2005 outlook after posting an expected drop in full-year earnings, hit by increased branding costs and trouble in a number of European markets. Carlsberg expects 2005 net profits to rise around 15 %, according to new International Financial Reporting Standards (IFRS).

In 2004, Carlsberg achieved substantial growth in beverage sales. Total beer volumes grew by more than 10m hl to 92.0m hl, and net revenue totalled approx. DKK 36bn.

Last year net revenue totalled DKK 36.0 billion, corresponding to an increase of 4%. At local exchange rates, revenue rose by 5%. Operating profit amounted to DKK 3,442m (-3%). Carlsberg A/S’ share of profit before goodwill amortisation and write-downs was DKK 1,425m compared to DKK 1,179m in 2003, corresponding to a substantial rise of 21%. Net interest-bearing debt was reduced to DKK 21.7bn, having briefly peaked at approx. DKK 33bn earlier in the year. It is proposed that a dividend of DKK 5.00 per share be paid (as in 2003). Carlsberg A/S’ share of profit is expected to increase by approx. 15% in 2005 (on comparable basis in accordance with International Financial Reporting Standards, IFRS).

In 2004, Carlsberg strengthened and defended its position as one of the world's leading breweries and also took a number of important steps in the implementation of the Group's strategy. By taking over Orkla ASA’s minority stake in Carlsberg Breweries and by acquiring the German Holsten-Brauerei AG, Carlsberg created a significant basis for future growth while at the same time initiating a number of in-house excellence programmes to ensure continued progress in profit.

The Carlsberg brand has been the world’s fastest growing international beer brand in recent years. The Carlsberg brand is the flagship of the Group’s beer brand portfolio which also includes a number of important, leading local brands in most of the major markets. Carlsberg was an official sponsor of the European Football Championships in Portugal, EURO 2004. It was Carlsberg’s largest sponsor agreement and marketing campaign to date. The Carlsberg brand achieved an unprecedented high level of exposure. This was followed up with local marketing activities in a number of countries, and Carlsberg recorded sharply increased sales figures during the period, especially in the UK and Portugal. 2004 also saw significant global progress for the Carlsberg brand of approx. 6%, partly due to major growth particularly in the Russian and Polish markets.

"The numbers are spot on while the 2005 profit growth forecast is a little lower than expected. All in all, I had expected a more positive tone for this year after the tough times the company had last year," said Jyske Bank analyst Annette Nikolajsen, who has a "reduce" rating on Carlsberg shares. "In fact we are looking at a double-digit underlying growth in the brewing activities," Carlsberg CFO Jorn P. Jensen told a conference call on Tuesday. "In terms of economic performance 2004 was not our brightest year," Carlsberg CEO Nils Smedegaard Andersen said.

By 1257 GMT, Carlsberg shares were unchanged at 288.00 crowns, after having lost more than one percent in early trade. The DJ Stoxx Food and Beverages index was down 0.3 percent.

Andersen was pleased that sales of beers branded "Carlsberg" grew around six percent, mainly due to increases in Russia and Poland. Carlsberg sponsored the EURO 2004 soccer finals in Portugal last year. "The Carlsberg brand achieved an unprecedented high level of exposure," he said, adding that marketing costs rose around 13 percent to 2.1 billion crowns.

"The outlook is slightly lower than expected, in particular the sales forecast," said Sydbank analyst Bjorn Schwarz, who maintains his "overweight" rating for Carlsberg.

Last week, Carlsberg got a 50 million euros ($65.31 million) dividend from its 50 percent-owned Baltic Beverages Holding (BBH), which owns Russia's biggest brewer, Baltika. Britain's Scottish & Newcastle owns the other half of BBH.

Carlsberg and S&N see BBH as a major growth contributor as both operate in mature western European beer markets, while Russia is one of the fastest growing beer drinking nations in the world. In neighbouring Sweden, Carlsberg was hit by illegal beer imports and an unsuccessful pricing strategy. A new country management has been named and a turnaround is seen this year. In Italy Carlsberg lost money on a number of customers and in Turkey sales were hit by higher excise duties. "I expect to see the results of the measures taken to solve these issues during the year," said Schwarz.


23 February, 2005