Carlsberg Group Impacted by Problems in Eastern Europe
Global beer volumes at Carlsberg Group declined organically by 3% in 2014 due to weakness in the Russian and Ukrainian beer markets. Reported beer volumes grew by 3% as a result of acquisitions in Asia. Other beverages grew organically by 6% due to strong volume development in the Nordic soft drinks businesses.
Carlsberg’s net revenue grew 2% organically to DKr64.5 billion (Eur8.7 billion) as the positive price/mix of 3% more than offset the organic decline in total volumes of 2%. Reported net revenue was flat as a result of a 6% decline from currencies and a net acquisition impact of 4%. The negative currency impact was mainly due to the significant weakness of the Russian rouble and the Ukrainian hryvnia.
Organically, group operating profit grew by 1% as strong performances in Western Europe and Asia more than offset the profit decline in Eastern Europe. Reported operating profit was DKr9.230 billion, affected by a negative currency impact of DKr789 million, mainly from the weaker Eastern European currencies. Group operating profit margin declined 80bp to 14.3%, primarily as a result of the acquisition impact from Asia and the Eastern European profit decline.
Reported net profit dropped from DKr5.47 billion in 2013 to DKr4.41 billion, negatively impacted by special items of DKr1.35 billion, which included a DKr 0.7 billion write-down related to the closure of two Russian breweries.
Buhl Rasmussen, chief executive of Carlsberg Group.
Buhl Rasmussen, chief executive of Carlsberg Group, comments: “In 2014, we had clear priorities and focus on execution, enabling us to deliver strong organic performance in Western Europe and Asia which more than offset the market challenges in Eastern Europe. For 2015, we’ll continue to support and invest in our brands and markets to capture the long-term opportunities in our regions, but in response to the current situation, we’ve built a strong operating plan, which includes changes to our business model, with the aim to achieve further efficiency improvements faster. These changes will enable us to mitigate the significant negative earnings impact arising from the rouble weakness and Eastern European market challenges, as well as improve cash flow and return on invested capital.”
For 2015, Carlsberg Group expects operating profit to grow organically by mid- to high-single-digit percentages.
An important part of the Danish brewer’s commercial strategy is to ensure that it maintains a strong portfolio of international premium brands and local power brands. During 2014, Carlsbert Group grew all its international premium brands – Carlsberg, Tuborg, Kronenbourg 1664, Grimbergen and Somersby – and achieved strong results for its local power brands.
During 2014, the group took further steps to strengthen its growth profile. In Vietnam, it increased the ownership of South-East Asia Brewery from 60% to 100% and of Hanoi-Vung Tau Beer Joint Stock Company from 55% to 100%. In the Czech Republic, Carlsberg Group acquired 51% of Zatecký Pivovar. In October, Carlsberg Group completed the acquisition of Chongqing Beer Group Assets Management and the following month announced the merger of its Greek business Mythos with Olympic Brewery creating a strong number two in the Greek market.
