Challenging Year For Carlsberg

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Challenging Year For Carlsberg

Challenging Year For Carlsberg
February 21
15:40 2011

Reflecting a highly challenging year in Russia, its largest market, Carlsberg increased net revenue by 1% to DKr60.05b (Eur8.0b) and operating profit by 9% to DKr10.25b in 2010. However, revenue fell 3% organically during the year with volume down 2% and a 1% decline in price/mix. Favourable currency factors were responsible for 8% of the rise in operating profit and organic growth was 1%.

Net profit grew by 49% to DKr5.35b but included special items of DKr598m related to step acquisitions. The group’s beer volumes were down by 1% to 114m hectolitres and the organic volume decline was 2%.

Carlsberg is focusing intensively on driving profitable market share growth, while simultaneously improving efficiencies across the group. This is a continuous process and an integrated part of the Carlsberg strategy and business model. During 2010, Carlsberg significantly intensified investments behind its key brands, including innovations, new products, media, digital, consumer and customer activities. The Danish brewer also invested in innovations to be launched in 2011 and beyond.

Market Trends

According to Carlsberg, overall beer market trends improved in 2010 compared to 2009. The overall beer market in Northern & Western Europe declined by an estimated 2-3% – a slightly improved trend compared to the estimated 5% decline in 2009.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Carlsberg continued to strengthen its position in the UK growing value and volume market share in both the on-trade and off-trade channels. In a UK market, which declined by 4%, the group grew volumes and added 110bps to take its market share to 15.4%.

The Russian market was stronger than anticipated. At the beginning of the year, Carlsberg expected a market decline of low double-digit percentages following the sharp rise in excise duty in January 2010, as consumer price increases of approximately 25% were needed to offset the duty increase. However, due to favourable weather conditions, overall faster and ongoing recovery of the Russian economy and improving consumer sentiment, the Russian beer market picked up in the second half of 2010 leading to a decline of approximately 4% for the year.

The other Eastern European markets improved significantly compared to 2009. The Asian beer markets, which were largely unaffected by the economic crisis in 2009, continued their very strong growth pattern.

“2010 was an extraordinary year for the group due to the substantial excise duty increase in our largest market and we are very pleased with the strong 2010 performance. The improved market share in a large part of our businesses demonstrates our ability to strongly execute on our plans,” comments Jorgen Buhl Rasmussen, chief executive of Carlsberg. “For 2011 we believe market dynamics will improve slightly, not least in Eastern Europe where we anticipate the Russian market to return to growth. In our efforts to balance profitable growth with continuous efficiency improvements we will roll out innovations and market tools to support growth during 2011.”

In 2011, Carlsberg is projecting low single-digit decline in Northern & Western European beer markets, growth of 2-4% in Russia and continued growth in key markets across Asia. The impact from increased input costs will be mitigated by higher sales prices in all regions. In Eastern Europe, the input impact will be higher than the group average and consequently operating profit margin in the region will be impacted negatively for 2011.

For 2011, Carlsberg expects market share growth in markets representing two-thirds of its business, high single-digit percentage growth in operating profit and adjusted net profit growth of more than 20%.

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