- Brewer upgrades profit forecast
- Volume growth bucks brewing industry trend
- But Russia uncertainty weighs on shares
Danish brewer Carlsberg (CARL-B:CPH) shrugged off cost inflation and the squeeze on drinkers’ disposable incomes to deliver a ‘solid’ performance for the first half to 30 June, giving management the confidence to raise its 2023 earnings forecast.
However, shares in the world’s third largest brewer by sales softened 2.1% to DKK999.6 on concerns over the future of its Russian business Baltika Breweries.
Put up for sale by Carlsberg in June, the business was unexpectedly placed under state control last month at the behest of Vladimir Putin, causing investors to question whether there is any value left in the Russia operation.
ASIA AND PREMIUM DRINKS DRIVE GROWTH
Carlsberg’s operating profit bubbled up 5.2% in the first half, comfortably ahead of analysts’ expectations, as drinkers continued to gulp down premium brands including the namesake lager as well as Tuborg, 1664 Blanc, Brooklyn and Somersby, and the group enjoyed continued growth in key Asian markets.
Copenhagen-headquartered Carslberg bucked the recent brewing industry trend for disappointing sales, with organic revenue up 11.2% in the half and organic volumes edging 0.8% higher, albeit slightly below the 1.2% growth the market was looking for.
Clearly, drinkers have swallowed price increases in Asia, where organic volumes fizzed up 4.8%, though Carlsberg met some resistance in Western Europe and Central & Eastern Europe judging by organic volume declines of 2.1% and 1.9% respectively in these regions.
Carlsberg’s positive volume performance was especially pleasing given the declines recently reported by rivals Anheuser-Busch Inbev (BUD:NYSE) and Heineken (HEIA:ASM).
The brewer also raised its 2023 organic operating profit growth guidance to 4% to 7% range, an upgrade from earlier guidance of a 2% decrease to a 5% increase.
WHAT DID THE CEO SAY?
In his last results announcement after eight years in the hot seat, outgoing CEO Cees ’t Hart commented: ‘Thanks to the results for the first half year, we were able to upgrade our earnings expectations yesterday, and we’re today initiating a new DKK 1 billion share buyback.
‘In June, we were pleased to announce the sale of the Russian business. However, shortly afterwards, we were shocked that a presidential decree had temporarily transferred management of the business to a Russian federal agency. We’re assessing the situation and the legal consequences of this highly unexpected move and will seek to protect our assets and the value of the business.’
Nevertheless, he insisted the long-term opportunities for Carlsberg ‘remain significant’, and is confident that new CEO Jacob Aarup-Andersen, the leadership team and ‘our many dedicated employees will continue the value creation journey.’
