Carlsberg First-Quarter Earnings Drop on Russian Destocking

Carlsberg A/S (CARLA), the world’s fourth- biggest brewer, said first-quarter earnings dropped after it sold less beer in Russia and spent more on sales and marketing.

Operating profit, excluding some items, fell 43 percent from a year earlier to 574 million kroner ($100 million), the Copenhagen-based company said today. Earnings missed the 845 million-kroner average of 16 analyst estimates compiled by Bloomberg. On so-called organic terms, the drop was 54 percent. Revenue was unchanged on the same basis, which excludes the effect of currency shifts, acquisitions or disposals.

Carlsberg owns the biggest brewer in Russia, where growth has been restricted by the effects of a 200 percent tax increase on beer at the start of 2010. Market share in the country slid to 37.4 percent from about 39 percent last year, the brewer said in February, after it increased prices and drinkers switched to cheaper beers. Retailers stocked up in the fourth quarter of 2011 in advance of another tax increase.

“In the traditionally small first quarter of the year, the group delivered continued solid growth and performance in northern and western Europe and Asia, while destocking impacted our Russian results as expected,” Chief Executive Officer Joergen Buhl Rasmussen said in the statement. “Our first- quarter results were in line with our plans.”

Volume Declines

Total revenue for the three months ended March 31 amounted to 12.9 billion kroner, compared with the 12.5 billion-kroner average estimate of 18 analysts surveyed by Bloomberg. The volume of beer sold fell 4 percent on an organic basis.

Carlsberg got about 39 percent of profit from the eastern European region last year, with 49 percent coming from northern and western Europe, where the brewer is cutting costs and focusing on higher-priced beers to offset difficult economic conditions and weak consumer confidence.

Organic operating profit increased 8 percent in northern and western Europe, even as “challenging consumer dynamics” cut sales in the southern part of the region, including Greece. Operating profit plunged 98 percent in eastern Europe as beer shipments slid 22 percent after Russian distributors stocked up on an extra 1.3 million hectoliters of beer in the fourth quarter, it said.

Total organic volume increased 2 percent, excluding the effects of Russian destocking, Carlsberg said.

Promotion Scheduling

Promotional investments will be weighted to the first half of the year “due to the implementation of certain marketing restrictions in Russia as of July,” the brewer said.

The brewer started selling its Tuborg brand in China in April and will roll out the beer with a “rejuvenated” image to more countries, it said. Asian sales and profit increased, aided by growth in Cambodia, Laos and India, and by “double-digit” increases in sales of the Carlsberg brand.

The brewer today maintained a forecast set in February for operating profit to stay at about the same level as last year, based on an average exchange rate of about 43 rubles to the euro, and said it anticipates that adjusted net income will grow “slightly.” The forecast excludes some one-time items.

The company expects a “low single-digit” decline in north and western European markets with a “modest” return to growth in 2012 in Russia and improving sales in Asia.

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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