Carlsberg raises its full-year profit guidance

Carlsberg is optimistic that in 2018 it will hike its profits (EBITDA) by a high-single-digit percentage. Previously it forecasted an increase of about five percent.

This optimism is based on buoyant beer sales in Asia during the first half of 2018. Carlsberg reported half year results on 16 August 2018 which showed an increase in total beer sales to 55.7 million hl, up from 54 million hl in the same period in 2017. It still sells the bulk of beer in Western Europe (22.9 million hl), followed by Asia with 17.8 million hl. Eastern Europe came in third at 15 million hl (27 percent).

Once upon a time – that is a decade ago – Russia was Carlsberg’s major profit pool. Not any longer. In the first half Western Europe accounted for over 50 percent of Carlsberg’s EBITDA, Asia for 34 percent and Eastern Europe for only 21 percent. This underlines that Russia is still a struggle.

This probably holds true for all international brewers in Russia. Consider it a clearance kick that last year, AB-InBev merged its Russia and Ukraine business with that of Turkey’s Anadolu Efes, thus creating a more serious contender for Carlsberg in Russia. Carlsberg leads the market with a 31 percent share of sales.

While consumer sentiment in Russia remains low, Carlsberg expects the Russian beer market to grow between one percent and two percent over the course of the year, reversing a decline of as much as five percent in 2017.

To date, the expected uptick in Russia does not show in Carlsberg’s books. Perhaps due to currency distortions, profits from Eastern Europe declined to DKK 1.43 billion (USD 224 million) from 1.46 billion in the first half of 2017.

That is why Carlsberg seeks to wring costs out of its business to weather a slowdown in beer demand in more established markets. It said it was on track to cut more than DKK 2.3 billion (USD 360 million) of costs.

Earnings in the first half rose six percent to DKK 4.37 billion (USD 684 million), while turnover dropped 0.7 percent to DKK 30.9 billion (USD 4.8 billion).

Russia beer market shares (%) 2018