E-Malt.com News article: UK: Carlsberg reassures over Russian drought

Carlsberg on August 17 sought to allay investor concerns over the impact of soaring barley prices as the Russian drought threatens to cut supplies of the brewing industry’s most important raw material, FT reported on August 17.

Barley prices have doubled in the past six weeks amid fears that the record-breaking heatwave and resulting fires in Russia could lead to the country’s worst barley harvest for 40 years. Carlsberg is particularly dependent on Russian grain because the Danish brewer counts Russia as its biggest market.

The comments echoed similar reassurances last week from Anheuser-Busch Inbev, the world’s number one brewer, suggesting that some of the biggest food and drink producers are relatively insulated from surging crop prices.

Trevor Stirling, analyst at Bernstein, said Carlsberg was the most exposed brewer to Russian barley and the least protected by hedging. But, as a big domestic buyer, the company could benefit from the decision by Vladimir Putin, Russian prime minister, to ban grain exports. “Brewers are facing a real increase [in barley prices], but it’s nothing to panic about,” said Mr Stirling.

In addition to its dependence on Russian crops, Carlsberg could also be affected by any impact of the drought on local consumers because the country accounts for nearly half its profits. Analysts have speculated that hot weather could have been good for beer consumption but there is also concern that smog from the fires may have kept consumers indoors.

Carlsberg said it was too early to assess summer sales but gave an improved outlook for the Russian market as it announced a sharp increase in second- quarter profits and raised its earnings guidance for the rest of the year.

Russian beer volumes dropped 9% in the first half after the government raised taxes on beer as part of a clampdown on alcoholism. However, Carlsberg said the decline was slowing and would be less than previously expected in the second half.

Net profits rose about 35% in the second quarter to DKr2.6bn ($450m), well ahead of analysts’ expectations, helped by a stronger Russian rouble and improved margins. Revenues were up 2% at DKr18bn, while total beer volume was flat.

The company, whose brands include Kronenbourg, Tuborg, Holsten and Baltika, said it gained market share in Western Europe, helped by strong sales during the soccer World Cup and increased investment in marketing and innovation.

The fastest growth came from Asia, where volumes rose 17%, underlining Carlsberg’s efforts to build its presence in China, Vietnam and India.


18 August, 2010