- Danish brewer warns higher prices could hit sales
- Carlberg brand volumes grew 14% in 2022
- Wide 2023 guidance range reflects myriad uncertainties
Shares in Carlsberg (CARL-B:CPH) softened 1.5% to DKK962.8 after the world’s third largest brewer by revenue warned price hikes needed to mitigate against higher commodity and energy costs could dent profits growth this year.
The warning accompanied palate-pleasing full-year results for 2022 from the Danish brewer, with sales bubbling up 16.9% to the best part of DKK70.3 billion or £8.4 billion, its highest growth in over a decade, as the beer market continued its post-Covid recovery.
THIRST-QUENCHING RECOVERY
Excluding Russia, results for 2022 from Copenhagen-headquartered Carlsberg, whose two larger rivals by sales are Anheuser-Busch Inbev (BUD:NYSE) and Heineken (HEIA:AMS), were well ahead of pre-pandemic 2019 levels.
Volumes rose 9% and adjusted earnings per share growth was even stronger at 69%, ‘with improvement achieved across many markets’ as drinkers returned to bars and restaurants to socialise.
For the eponymous Carlsberg brand, volumes fizzed up 14% amid very strong growth in Asia and solid growth in the UK, Germany and Sweden.
WIDE GUIDANCE RANGE
However, investors were spooked as Carlsberg warned: ‘Due to our and our suppliers’ rolling hedging, last year’s commodity and energy price increases will have a significant impact on our 2023 cost of sales and logistics costs. We intend to offset the higher costs in absolute terms through pricing, mix and continued tight focus on costs.’
The brewer warned that while beer historically has been ‘a resilient consumer category’, higher prices in combination with high inflation ‘may have a negative impact on beer consumption in some of our markets, particularly in Europe.’
As a result of these factors and uncertainties including the development of the war in Ukraine and China’s post-Covid recovery, Carlsberg served up a wide guidance range for 2023, warning organic operating profit could fall by as much as 5% or rise by up to 5%.
WHAT DID THE CEO SAY?
CEO Cees ’t Hart said 2023 will be ‘another challenging year, but the strategic, organisational and financial health of our company is strong, and we are confident that our purpose-led and performance-driven culture will drive continued sustainable long-term value creation.’
The Western brewer most exposed to Russia, Carlsberg announced a sale of its business in the country as a consequence of Putin’s invasion of Ukraine.
Carlsberg expects to find a buyer for its large Russian business by June, but the company also raised eyebrows by stating it is seeking an option to re-enter that market at some point in the future.
