Asian Performance and Cost Savings Boost Carlsberg

Throughout the year Asian volumes continued to grow at high single-digit growth rates. Eastern Europe and Northern & Western Europe volumes declined organically by mid-single-digit rates.

23 Feb 2010 --- Carlsberg delivered a strong 2009 operating profit of DKK 9.4bn (DKK 8.0bn in 2008). For the beverage activities organic operating profit growth was 28%. Group operating profit margin improved to 15.8% (13.3% in 2008) and free cash flow improved substantially to DKK 10.5bn. As a result of detailed planning and strong execution the Group managed to mitigate the impact from the market challenges and also improved market shares.

The Group's beer volumes increased by 6% to 116.0m hl with an organic beer volume decline of 4% (flat for Q4) and net acquisitions contributing 10%. Throughout the year Asian volumes continued to grow at high single-digit growth rates. Eastern Europe and Northern & Western Europe volumes declined organically by mid-single-digit rates.

Net revenue declined by 1% to DKK 59.4bn (DKK 59.9bn in 2008) with a flat organic net revenue development. Excluding currency impact, total net revenue would have increased by 6% in 2009. Value management initiatives and price increases resulted in a positive price/mix effect of 4%. Q4 net revenue was DKK 13.6bn with organic net revenue growth of 3%.

In 2009 Carlsberg improved market share in a significant part of the business. The Group gained market shares in most markets in Eastern Europe and Asia, with particularly strong gains in the Ukraine and Russia. The Group maintained overall market share in Northern & Western Europe.

New products were launched in all regions and Carlsberg will further intensify its focus and resources on building a strong portfolio of new products and brand innovations.

Group operating profit increased to DKK 9,390m (DKK 7,978m in 2008) with 28% organic growth for the beverage activities. For Q4, Group operating profit was DKK 1,643m (DKK 1,386m in Q4 2008) with 32% organic growth in the beverage activities. The Eastern European and Asian regions were the main drivers behind the strong organic growth.

Operating margin increased to 15.8% (13.3% in 2008). Q4 Group operating margin was 12.1% (9.6% in Q4 2008).

Net profit was DKK 3.6bn (DKK 2.6bn in 2008) and earnings per share were DKK 23.6 (DKK 22.1 in 2008). For 2009 Carlsberg proposes a dividend per share of DKK 3.5 (DKK 3.5 for 2008).

Driven by the intense and structured focus on cash flow improvements throughout the Group, free cash flow was exceptionally strong at DKK 10.5bn. Higher profits, lower capital expenditures and a significant year over year improvement in working capital were the main reasons behind this.

In line with the intention of rapidly deleveraging the Group, net interest-bearing debt was reduced substantially to DKK 35.7bn compared to DKK 44.2bn at the end of 2008. Net debt/EBITDA was 2.7x at the end of 2009.

Of the DKK 1.3bn synergy target related to the S&N acquisition, around DKK 970m annualised savings have been achieved as at 31 December 2009. The remainder of the synergy target will be achieved in line with the original plan.

In a Russian market that declined by around 10% in 2009 Carlsberg improved its market share from 38.8% to 40.6% (+180bp). Due to the 200% increase in excise duties on 1 January 2010, Carlsberg expects the Russian beer market to show a low double-digit decline in 2010 and anticipates that Carlsberg will continue to outperform the market.
For 2010 Carlsberg expects:

• Operating profit to be in line with that reported for 2009 (notwithstanding the extra earnings in Q4 2009 generated by stockbuilding in Russia ahead of the excise duty increase as set out below).

• Net profit growth of more than 20% based on the expected operating profit.

• Due to the Russian stockbuilding in Q4 2009 and subsequent destocking in Q1 2010, the Group's Q1 2010 and 2010 full-year operating profit will be negatively affected by approximately DKK 300m. This is included in the 2010 expectations. Furthermore, due to phasing of price increases linked to the excise duty increase in Russia, earnings will be skewed more towards the second half of the year.

• Carlsberg has set new medium-term (3-5 years) operating margin targets:

• Northern & Western Europe at 15-17% (previously 14-16%)

• Eastern Europe at 26-29% (previously 23-25%)

• Asia at 15-20% (new)

• Carlsberg Group at around 20% (new)

Commenting on the results, CEO Jørgen Buhl Rasmussen says: “We were well prepared for 2009 as we identified earnings protection and cash flow improvement as our top priorities going into the year. The 2009 result demonstrates that we have been successful in our efforts to meet these goals. For 2010 profitable market share growth through accelerated initiatives on brands and innovations will be a top priority as well as continuing our focus on efficiency improvements. While we expect consumer dynamics to be challenging in 2010, we also see many opportunities to strengthen our position in key markets.”