Carlsberg issues profit warning
The civil war in the Ukraine is having its effect on global brewers. The world’s number four brewer Carlsberg was forced to issue a profit warning after it swung to a net loss in the first quarter, the brewer announced on 7 May 2014.
The company reported a 14 percent net revenue decline in Eastern Europe in the January to March quarter, compared with a year earlier, and its overall operating profit fell by about a third.
Carlsberg, whose eastern European region (mainly Russia but also the Ukraine) contributes the most to group volumes and profits, has downgraded its full-year outlook for net performance, saying it now expects net profit to grow by a low-single-digit percentage in 2014, instead of the mid-single-digit percentage it previously expected.
Carlsberg was also hit by poor weather conditions in China and a weak economy in Vietnam. It said organic growth conditions, excluding the impact of foreign exchange, remains strong and the performance of its premium labels is strengthening.
Even before the crisis in Ukraine, which has affected many European companies with a presence in Russia, brewers were struggling due to regulatory changes and other factors that pulled the overall Russian beer market down. Last month, Dutch brewer Heineken, one of Carlsberg’s main rivals there, reported a 37 percent fall in first quarter net profit, citing “challenging beer market conditions in Russia.”
Carlsberg has been working for several years to offset its dependence on a stagnant Russian market by expanding into other emerging markets, including Asia. Western European demand, meanwhile, remained strong, according to the company.
The company posted a net loss of DKK 50 million (USD 9.21 million) in the first quarter, down from a profit of DKK 95 million a year earlier. Operating profit fell 32 percent to DKK 453 million (USD 83 million) during the period. Overall sales rose 1.5 percent during the period to DKK 12.9 billion (USD 2.4 billion).
Group beer volumes for Carlsberg declined 3 percent during the first quarter, as organic growth in Western Europe was wiped out by declines in Eastern Europe and Asia. In addition to unfavourable weather conditions in Asia, Carlsberg also pulled back from unprofitable volumes during the quarter, it was reported.
