Carlsberg disappoints investors
Brewer Carlsberg left analysts in a tizzy after they cancelled their medium-term profitability goal. The February 2010 target to boost operating profit to 20 percent of sales in three-to-five years has “proved difficult to use”, Carlsberg said on 18 February 2013, adding that “several events, both within and beyond our control, have and will continue to impact margins.”
“The change in long-term financial targets is probably the most disappointing element in the report”, the Sydbank analyst Morten Imsgaard was quoted as saying. He added that this “helps paint a picture of a brewery which is not entirely in control of factors which are decisive for earnings.”
Since Carlsberg set the margin target, the European economy has been wobbly while Russia, their biggest single market, has seen a government-led clampdown on beer sales.
Carlsberg said that beer demand in Russia had been stagnant while the western European market declined about 1 percent to 2 percent in 2012. Fortunately, demand in Asia increased.
The company generated 44 percent of earnings from its eastern Europe unit, primarily Russia. It enjoyed a market share of 38.3 percent in Russia in the fourth quarter, unchanged from the same period a year earlier, though down from 38.9 percent in the previous quarter.
Carlsberg’s CEO Jorgen Buhl Rasmussen offered little hope that the Russian market would see much improvement this year.
Carlsberg hope to drive up profits in western Europe by centrally managing all their procurement and logistics in the region, which will “yield significant long-term benefits” but “will also require significant resources”, they said. In other words, Carlsberg will have to spend before they can earn more.
The revamp, while helping operating margins in the region in the long term, will cost DKK 300 million (EUR 40 million) to DKK 400 million this year, DKK 400 million to 500 million in 2014 and DKK 500 million in 2015, the brewer said.
Earnings in 2013 are forecasted to be about DKK 10 billion (EUR 1.3 billion), the brewer said in the statement. It reported unchanged profit of DKK 9.8 billion for 2012, achieving its target to match 2011.
