Carlsberg Misses Estimates on Russian Bottle Cap -- Earnings Review

02/07/18 08:09 AM EST
   By Adria Calatayud 
 

Danish brewer Carlsberg AS (CARL-A.KO) on Wednesday reported its results for the second half and full 2017. Here's what you need to know:

 

NET PROFIT: Carlsberg's net profit was 1.26 billion Danish kroner ($209.4 million), missing by 74% a consensus forecast provided by FactSet and down 72% on year. For the second half, analysts had penciled in a profit of DKK2.65 billion, but the brewer slid to a net loss of DKK1.05 billion from a profit of DKK2.62 billion in the year-earlier period. Carlsberg attributed both the full-year profit plunge and the second-half loss to challenging conditions in Russia, its largest market. The results were dragged by a DKK4.8 billion impairment charge on Carlsberg's Baltika brand in Russia due to a new limit on the size of plastic bottles used to sell alcohol, the brewer said.

 

REVENUE: The Danish company's full-year revenue was DKK61.81 billion, down 1.3% on year and falling short of expectations of DKK62.20 billion, according to a consensus of estimates provided by FactSet. Fourth-quarter revenue declined 3.4% on year to DKK13.36 billion, below FactSet's consensus forecast of DKK13.89 billion.

 

WHAT WE WATCHED:

 

SHIFT OF FOCUS: Analysts at Handelsbanken Capital Markets expected Carlsberg to shift its focus to long-term growth from short-term cost-cutting. The Danish brewer said it accelerated its investments in strategic growth priorities over the second half, bringing full-year total to DKK500 million. At the same time, the company flagged the benefits from its cost-cutting initiatives and raised its efficiency-gains guidance by 2018 to DKK2.3 billion from DKK2 billion. More than 50% of the savings will improve operating profit and margins, with the remaining amount being reinvested in the business, Carlsberg said. Further support to its craft-and-specialty portfolio, to alcohol-free brews and to its draught system are among the strategic priorities in which the company is investing, it said.

 

YEAR AHEAD: The brewer said it is targeting a mid-single-digit percentage organic growth in operating profit for 2018, which would be below an 8.4% organic rise in 2017. This exceeds Handelsbanken's expectations of a low single-digit operating-profit growth. As anticipated by Handelsbanken, the company raised its 2017 dividend by 60% to DKK16 a share to compensate for the modest guidance. Carlsberg also forecasts a foreign-exchange hit of DKK450 million this year due to the recent strength of the Danish krone against most currencies.

 

VOLUMES: Carlsberg said total volumes fell 4% last year, and 2% on an organic basis, and continued the declining trend that this metric has shown over the last years. Beer organic volumes were down 3%, hit by a weakened performance in Russia, while other beverages grew 2%, as demand in the Nordics and Asia grew. In the fourth quarter, beer sales decreased 1.3% on year to 23.6 million hectoliters. A hectoliter is equivalent to 100 liters.

 

Write to Adria Calatayud at adria.calatayudvaello@dowjones.com

 

(END) Dow Jones Newswires

February 07, 2018 08:09 ET (13:09 GMT)

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