E-Malt.com News article: 2348

The Danish Brewery Group A/S announced on 17 March 2004 to the Copenhagen Stock Exchange its annual results 2003. Adjusted for the accounting implications of the closure of the Group’s brewery in Randers, which had a negative net profit effect of DKK 40 million, The Danish Brewery Group achieved a profit before tax of DKK 223 million for 2003, which is the best result ever in the Group’s history. The profit before tax of DKK 223 million is in accordance with the expectations expressed in the Annual Report for 2002 (cf. Announcement BG 06/2003 of 19 March 2003), i.e. a profit before tax in the range from DKK 210 to 235 million.

The results for 2003 were achieved in spite of difficult conditions in several markets. The deposit scheme introduced for disposable containers in Germany, sales conditions in Lithuania and Poland and the disposal of the brewery activities in the UK in mid 2002 resulted in an approximate 5% decrease in annual revenue compared to 2002. The profit margin, which was at 9.1% in 2002, increased to 10.7% in 2003. This is primarily due to the effects of the V8 Strategic Plan, partly by way of improved product and market mix, partly as a result of the resource optimisation projects realised as well as there has been a positive development in other operating income. Similarly, return on invested capital (ROIC) increased from 8.8% in 2002 to 10.1% in 2003 adjusted for the closure of the Randers brewery. Free cash flow for the year amounted to DKK 266 million. The results achieved in 2003 are a major step towards the realisation of the targets established in the V8 Plan: A return on invested capital (ROIC) of at least 10% in 2004; A profit margin of at least 10% in 2004; Free cash flow (cash flow from operating activities less net investments in property, plant and equipment and plus dividends from associates) to be maintained above DKK 200 million per year.

Total group sales in 2003 aggregated 4.1 million hectolitres of beer, malt and soft drinks, which is a 10% decline from 2002. Some 2 percentage points of the decline are due to the disposal of the brewery activities of Robert Cain & Co. Ltd. in mid 2002. Beer and malt drinks sales aggregated 3.1 million hectolitres, which is an 11% decline from 2002, whereas soft drinks remained unchanged from 2002 at 1 million hectolitres. Net revenue amounting to DKK 2.6 billion decreased by 5% from 2002, of which deposit problems in Germany and the disposal of the Robert Cain activities each accounts for 2 percentage points.

Operating profit went up by 12% from 2002, amounting to DKK 283 million. The increase is primarily due to a reduction of the Group’s overheads. Profit margin reached 10.7% compared to 9.1% in 2002. Earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to DKK 431 million in 2003, which is a 2% decline from 2002. Adjusting for ”Special Items” in both years, EBITDA showed a 4% increase over 2002.

Income from investments in associates amounted to DKK 9.1 million in 2003, which is DKK 11.5 million below the 2002 figure. The development is primarily attributable to Hansa Borg Bryggerierne ASA, of which The Danish Brewery Group holds 25% through Hansa Borg Skandinavisk Holding A/S. In 2002 Hansa Borg was not included in the Group’s financial statements for Q1. As Q1 results are typically negative, this had a negative effect of some DKK 5 million on the Group in 2003 compared to 2002. Moreover, earnings of Hansa Borg Bryggerierne ASA in the autumn of 2003 were not satisfactory due to intensified price competition in the Norwegian market.

Net revenue in Western Europe decreased by a total of 5%. 2 percentage points of the decline related to the disposal of the Robert Cain & Co. Ltd. activities at the end of H1 2002, whereas the revenue decline in Germany due to the deposit problems relating to disposable containers accounted for 2 percentage points.

For Denmark an approximate 2% decline in the total beer market (in volume terms) from 2002 to 2003 is estimated, whereas total beer sales of The Danish Brewery Group went up by some 3% from 2002. This means that the Group won market shares on beer in Denmark in 2003, equal to an approximate 1 percentage point increase, primarily due to the sales of Royal Export and Heineken. The closure of the Group’s brewery in Randers progressed as planned, and the market share of the Thor brand was successfully defended.

In Germany the year was strongly influenced by the deposit introduced on disposable beverage containers at 1 January 2003. The lack of a functioning return system for disposable containers resulted in a considerable decline in sales of these containers. This significantly affected sales of Faxe Premium, which is the leading import beer in Germany and is only sold in cans. An approximate 50% decline in total German canned beer sales is estimated for 2003, and total German beer consumption reduced by some 3% - a decline that would probably have been larger had the summer of 2003 not been so favourable. Fundamentally the same factors caused the decline in the Tax Free segment as sales onboard the ferries to and from Germany also suffered from the deposit issue.

Sales and net revenue in Eastern Europe decreased by 24% and 23%, respectively, which is due to decreasing exports from Denmark to Poland and a decline in Lithuania for discount and export products. Operating profit decreased in 2003 primarily due to continuously unsatisfactory development in Poland. The situation in Poland caused The Danish Brewery Group to acquire the remaining shares of the Group’s Polish distributor Peva Poland Sp. z o.o. in early 2004.

In the Caribbean the consolidation of Impec Holding SAS as of Q4 2003 implied a revenue increase of 27%. However, sales in the region decreased by 6% primarily due to the decline in American tourism caused by the weak USD and general uncertainty relating to the conflict in the Middle East. In spite of the positive net profit effect of the acquisition of the 51% shareholding, earnings decreased in the region due to the continuously falling USD rate.

In the USA and Canada increasing sales were primarily driven by positive developments in Canada, whereas the falling USD rate explained the stagnating revenue. In Africa, malt sales were also in 2003 affected by a shift from export products to products produced on licence, which led to a net revenue decrease.


18 March, 2004