E-Malt.com News article: 4474

Denmark: The Danish Brewery Group (Bryggerigruppen) announced on March 17 that in 2004 it achieved a profit before tax of DKK 250.2 million, which is in line with the expectations expressed in the Company’s Q3 Report 2004, that is a profit before tax in the amount of DKK 235-265 million.

In 2004, Europe saw the worst summer weather in several decades, which had a negative effect on consumption of both beer and soft drinks contributing to intensifying the already keen price competition – particularly in Northern Europe. Accordingly, the results achieved in Denmark, Norway, Lithuania and Germany were affected by this price pressure. The situation in Germany regarding deposit on disposable containers remained unsettled, which continued to obstruct sales opportunities for the Faxe brand.

In 2004, profit margin was at the targeted 10% compared to 10.7% in 2003. The development in profit margin from 2004 is primarily explained by a supply agreement with COOP, the acquisition of the distribution company Impec Holding SAS as of Q4 2003 as well as the increased price pressure mentioned above and the summer of 2004 being unfavourable to beverages sales.

Return on invested capital (ROIC) was at 10.5% compared to 10.1% in 2003 (adjusted for DKK 40 million in respect of the closure of the Group’s Randers brewery). Free cash flow for the year amounted to DKK 233 million. Accordingly, the key targets identified in V8 and V8 Next were achieved in 2003 and 2004, not least as a result of the V8 Plan initiatives of resource optimisation and streamlining. The targeted savings for the period were realised. However, a 2004 project on reorganisation of the Danish storage structure involved higher non-recurring expenses than anticipated, which affected the Group’s profit before tax negatively by some DKK 12 million.

Total group sales in 2004 aggregated 4.8 million hectolitres of beer, malt and soft drinks, which is a 17.5% increase over 2003. Some 10 percentage points of the increase are attributable to Cido Partikas Grupa, which is included in the Group’s financial statements as of Q3 2004. Beer and malt drinks sales aggregated 3.4 million hectolitres, which is a 10.9% increase over 2003, whereas soft drinks sales (including mineral water and fruit juices, etc) aggregating 1.4 million hectolitres increased by 39.9% primarily as a result of the acquisition of Cido Partikas Grupa.

Net revenue amounting to DKK 2.9 billion in 2004 increased by 9% over 2003. Just below 5 percentage points of the increase are attributable to the acquisition of Cido Partikas Grupa. Furthermore, the Caribbean (in consequence of the acquisition of Impec Holding SAS in Q4 2003) and Germany showed considerable growth.

Operating profit amounted to DKK 289 million equal to a 2% increase over 2003. The development was affected by an 18% increase in the Group’s administrative expenses, which was primarily due to the full-year effect of the acquisition of the distribution company Impec Holding SAS and the acquisition in 2004 of SIA ”Cido Partikas Grupa” in Latvia. Earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to DKK 496 million compared to DKK 431 million in 2003.

Net revenue increased by a total of 2% based on a sales increase of 8%. The development is primarily characterised by the exceptionally cold and wet summer, increased price pressure in Northern Europe, Denmark in particular, the agreement made with COOP for beer supplies as well as the increase in Italian beer taxes introduced in early 2004.

In 2004, The Danish Brewery Group increased its market shares in its key markets in Western Europe. In Denmark an approximate 6% decline in the total beer market (in volume terms) from 2003 to 2004 is estimated due to the wet and cold summer weather in 2004, among other things. Over the period the sales of The Danish Brewery Group went up by 17%, which means that the Group won market shares in the Danish market. The Group’s market share increase is estimated at some 5 percentage points, which – in addition to the supply contract with COOP – is primarily attributable to Royal Pilsner and Royal Classic. Furthermore, the Royal Export, Heineken and Albani brands developed satisfactorily, whereas Faxe saw a larger decline than expected as a result of the launch of Royal Pilsner and Royal Classic. Price competition on branded beer in Denmark was at an unprecedented intensified level in 2004, partly caused by the unfavourable weather conditions in the summer months.

In Italy the decline in total beer consumption is estimated at some 3.5%, partly as a result of the weather and partly as a result of the increase in beer taxes introduced at 1 January. The Group’s main product Ceres Strong Ale achieved volumes at the 2003 level, whereas Ceres Top increased by some 40%. Faxe Premium and Ceres Royal, which are not considered focus products in Italy, showed decline. Both Strong Ale and Ceres Top won market shares in 2004.

In Germany the market continued in 2004 to be affected by the deposit introduced on beverages in disposable containers in 2003, and total German canned beer sales are estimated to have declined by 70- 80% from the 2002 level. The decline in total German beer consumption is estimated at 1.5% from 2003 to 2004. Faxe Premium, which is the leading import beer brand in Germany and which has so far only been marketed in cans, was in 2004 also launched in a 66 centilitre returnable glass bottle and a 50 centilitre PET bottle (disposable container). The returnable glass bottle is distributed in cooperation with Flensburger Brauerei. In the second half of 2004 these initiatives contributed towards stabilising Faxe sales in Germany. The increase in exports to Germany achieved in 2004 is therefore solely attributable to an increase in The Danish Brewery Group’s exports to the market for cross-border trade.

The relaunch in Lithuania of the Kalnapilis brand, which was effected in the spring of 2004, meant that the Company won market shares in a total market estimated at a 5-6% increase in 2004. Also the Tauras brand made progress; however, primarily in the low-priced segments. The results achieved in Lithuania were satisfactory confirming the positive development recorded in 2003 and 2004.

In Poland the results achieved were not satisfactory. Since early 2004 when The Danish Brewery Group acquired the remaining shares of the Group’s then distributor, efforts have been directed at reorganizing the sales structure in Poland to increase distribution of the brands of The Danish Brewery Group. Therefore, in line with the Group’s strategy, the cost level in Poland was increased in 2004 resulting in increased distribution of the Group’s products. The results from the Group’s Polish activities are not expected to balance in 2005 either.


20 March, 2005