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Carlsberg Quarterly Profit Misses Estimates on Costs, Russian Sales Drop

Carlsberg AS, the owner of Russia’s biggest brewer, reported fourth-quarter profit that missed analysts’ estimates as the cost of beer ingredients rose and sales in the country declined.
Net income fell 21 percent to 301 million kroner ($55 million), Copenhagen-based Carlsberg said today in a statement. Profit was less than the 424 million-krone average estimate of 18 analysts surveyed by Bloomberg News. Full-year earnings before income and tax, excluding some items, rose 9 percent to 10.3 billion kroner. Carlsberg said it aims for earnings on that basis to increase by a “high single-digit” percentage in 2011.
“We are very pleased with the strong 2010 performance,” even as it was “an extraordinary year for the group due to the substantial excise duty increase in our largest market,” Chief Executive Officer Joergen Buhl Rasmussen said in the statement. “For 2011 we believe market dynamics will improve slightly, not least in eastern Europe where we anticipate the Russian market to return to growth.”
Carlsberg is facing challenges in 2011 from steep increases in the price of commodities used to make and package its beer after record droughts cut the amount of grain harvested in Russia and eastern Europe last year. The company gets 52 percent of its profit from the region. Sales in Russia fell last year following a 200 percent increase in tax on beer.

Raising Prices
The company is among brewers seeking growth in regions outside western Europe and the U.S., where sluggish consumer spending is restricting sales. Carlsberg reiterated today a statement in November that increasing costs will force the company to raise prices.
“Investors are likely to focus on full-year guidance, particularly regarding growth expectations for Russia,” Trevor Stirling, an analyst at Sanford C. Bernstein in London, wrote in a note published before the results.
Carlsberg said it expects the Russian beer market to expand 2 percent to 4 percent this year, compared with a decline of a “low single-digit” percentage in northern and western Europe. Operating profit in eastern Europe this year will be “impacted negatively” by input cost increases that are higher than in the rest of the world, Carlsberg said.

21 Feb. 2011

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