Asian markets to brew higher earnings for Carlsberg

By Staff Writer

Feb 10, 2016 10:31 PM EST

Carlsberg A/S forecasts rise in earnings propelled by Asian markets. The Copenhagen-based company expects operating profit organic basis to surge by a low single-digit percentage.  Despite drop in earnings, the fourth quarter numbers are above analysts' forecasts. 

The world's fourth biggest brewer Carlsberg has undertaken cost cutting exercise. As part of it, the company is slashing jobs and closing down breweries. The company's profits were declining for years on Russia's shrinking beer market.

Bloomberg reports that the crisis in Ukraine, weakening Russian currency Ruble and shrinking beer market have been impacting Carlsberg negatively. The consumer confidence in Russia was at low ebb. Carlsberg owns Baltika Breweries, which is largest brewer in Russia. 

The Danish brewer Carlsberg will chalk out new strategy for business growth and value addition for investors. The new business plan is expected to be announced on 16 March 2016. The fourth quarter earnings before interest, taxes and one-time items eased 21 percent to Kroner1.4 billion ($210 million). The average estimate of analysts in a Bloomberg's poll was Kroner1.22 billion. 

The total sales in the fourth quarter were at Kroner14.7 billion ($2.22 bln) as against the forecast of Kroner14.2 bln. For the entire year of 2015, the EBIT was Kroner 8.46bln as against the Korner9.23 bln in 2014. Carlsberg is majorly exposed to Russia and eastern Europe markets after it paid £7.8bln for Scottish & Newcastle in 2008, as reported by Financial Times.

The Chief Executive Officer Cees 't Hart said: "Our businesses in western and eastern Europe had a challenging year. As a consequence of the strong Asian results, however, 2015 marked the inflection point when the growth markets of Asia accounted for a larger part of the group than eastern Europe."

Carlsberg's net profit for the fourth quarter was Kroner 78 million ($11.7million) lower from Kroner 168mnl in the previous corresponding quarter. The net sales during the quarter rose marginally by two percent to Kroner14.6 billion. The sluggish sales in Europe more than halved the profit for the fourth quarter. However, it managed to improve overall revenues narrowly, according to CNBC.

Carlsberg has doubled its presence in Russia through Scottish & Newcastle. The rising taxes, weakening economy and regulatory restrictions have been impacting the performance for over two years. Carlsberg closed down two of its 10 breweries in Russia last year. 

Carlsberg in November 2015 announced 2,000 jobs cut. Now, it's planning to trim costs by Kroner 2 billion by 2018. The beer sales volume in 2015 eased four percent owing to drop in sales in Eastern Europe.

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