Carlsberg Q1 Earnings Plunge on Russian Destocking

Due to the volume decline and slightly higher input costs, organic gross profit declined by 3% and gross profit margin decreased by 120bp to 46.7%. Organic gross profit per hl increased slightly.

9 May 2012 --- Carlsberg has reported that group beer volumes declined organically by 4% in the first quarter. On a comparable basis, i.e. adjusting for the destocking in Russia, beer volumes grew organically by 2%. Reported beer volumes declined 2% to 22.9m hl. Volumes grew in Northern & Western Europe and Asia, while the company’sEastern European volumes declined, impacted by the expected destocking in Russia. Pro-rata Group volumes of other beverages were unchanged at 3.8m hl.

Net revenue grew by 3% to DKK 12,874m with flat organic development (total beverages volume of -4% and positive price/mix of 4%), +1% from currencies and net acquisition impact of 2%. Cost of sales per hl grew in line with our expectations. Due to the volume decline and slightly higher input costs, organic gross profit declined by 3% and gross profit margin decreased by 120bp to 46.7%. Organic gross profit per hl increased slightly.

Group operating profit was DKK 574m (DKK 1,003m in 2011). Northern & Western Europe and Asia reported operating profit growth in spite of slightly higher cost of sales and higher sales and marketing investments due to different phasing than last year. Profits in Eastern Europe declined mainly due to lower volumes, slightly higher cost of sales and different phasing of sales and marketing investments compared to previous year.

Net profit was DKK -76m. Adjusted net profit (adjusted for post-tax impact of special items) was DKK -33m compared to DKK 239m in Q1 2011.

The Carlsberg Group grew market shares in Northern & Western Europe and Asia during the quarter. In Eastern Europe, our Russian market share improved slightly compared to Q4 2011 but declined as expected versus Q1 2011.

The Carlsberg brand grew by 6% in premium markets with particularly good results in Asia. The Group activated the brand across all markets and regions in the run up to EURO 2012 in Ukraine and Poland, and this supported volume growth in the quarter. EURO 2012 related activities continue in Q2 with a particularly high activity level during the championship in June.

Commenting on the results, CEO Jørgen Buhl Rasmussen says: “In the traditionally small first quarter of the year, the Group delivered continued solid growth and performance in Northern & Western Europe and Asia, while destocking impacted our Russian results as expected. Our Q1 results were in line with our plans and we are on track to meet our 2012 expectations.” At the beginning of the year, Russian taxes on beer rose by 20 percent, meaning Russian consumers bought more beer before the increase.

Jørgen Buhl Rasmussen continues: “2012 is a year where focus, prioritisation and efficiency are key in everything we do. We are focusing our commercial activities behind our most important brands and events. We are putting significant resources behind the EURO 2012 sponsorship, which will be a key driver behind the support of the repositioning and the growth of the Carlsberg brand in 2012. In addition, the rejuvenation of the Tuborg brand will support the brand growth through improved performance in existing markets, as well as through introductions into new growth markets such as China.”