Weak Russia Sales Hit Carlsberg’s Profits
Comments (0) “We have some disappointing developments in Russia. Sales have not been growing, and it is clearly because Russian consumers are taking longer to adjust to higher prices,” Jorgen Buhl Rasmussen, CEO at Carlsberg, told CNBC.
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COPENHAGEN (Reuters) – Danish brewer Carlsberg (CARLb.CO: Quote, Profile, Research, Stock Buzz) cut its full-year outlook when reporting a 13 percent fall in quarterly profit that missed forecasts after sales in its key Russian market were hit by higher prices, sending its shares diving.
“Second-quarter performance in Russia has been below expectations,”
chief executive Jorgen Buhl Rasmussen said .
The world’s fourth-largest brewer said it now saw full-year adjusted net profit growth of 5-10 percent, against previous guidance for more than 20 percent.
Carlsberg also cut its outlook for 2011 beer volume growth in Russia, which accounts for about 40 percent of group sales.
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“The recovery in the beer category is taking longer than we anticipated as the Russian consumer adapts to the exceptional price increases of around 30 percent undertaken during the last 18 months,” Rasmussen said, adding that had a negative impact on Russian profit and was the driver behind its downgraded outlook.“I would not have thought that Carlsberg would have to downgrade its outlook due to this,” Alm. Brand analyst Stig Nymann said, adding he had expected it would have been easier to get price increases through in eastern Europe.
“Perhaps we are now heading toward more difficult times for the Russian economy and Carlsberg ought to be careful not to tighten the price screw too hard from now on,” Sydbank analyst Morten Imsgard said.
Rising raw materials prices have been challenging the world’s brewers, who have looked to compensate by passing higher costs on to drinkers. The price of barley, a basic ingredient for brewing beer, has risen more than a third this year.
Fires and drought in eastern Europe last year have helped push up the price of ma
lt barley. Unfavorable weather during the second quarter also hit beer consumption, the brewer said.Carlsberg shares were down 18 percent to an 18-month low at 368.90 crowns by 6:45 a.m. EDT as investors remained worried about Russia, which is trying to reduce alcohol consumption.
“The market is nervous about how Russia will look in the coming years,” said Nykredit analyst Ricky Rasmussen.Regulatory headwind
Russia is to impose a ban on all beer sales at outdoor kiosks, public transport stations, airports and petrol stations, which account for around a third of national sales, and the measures are to take full effect from 2013. Russian consumers switching from spirits to drinks with lower alcohol contents would ensure that Carlsberg could meet its mid-term growth, the chief executive said.
“If we all agree on the historic trend that lower alcoholic beverages take a higher share, then by definition, beer should come up in consumption,” said Buhl Rasmussen.
(Reporting by By Mette Fraende REUTERS)
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