Carlsberg profits warning over Ukraine crisis

Carlsberg chief executive Jorgen Buhl Rasmussen. Picture: AFP
Carlsberg chief executive Jorgen Buhl Rasmussen. Picture: AFP
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CARLSBERG jolted the market with its second profits warning in 2014, as the brewer revealed the Ukraine conflict and economic uncertainties would dent its annual earnings.

The Danish drinks giant said Russian beer volumes – which account for more than a third of its business – fell between 6 and 7 per cent in the second quarter, while Ukrainian beer consumption dropped 10 per cent.

Carlsberg said its eastern European markets were “increasingly challenging and uncertain”, with its problems in Ukraine exacerbated by a 43 per cent leap in beer tax as that country’s government tries to steady its public finances.

The company said consumers in Russia were drinking less due to economic uncertainties. Financial markets believe that the country may be flirting with recession as western sanctions over Ukraine bite.

The West has accused Moscow of supporting a militant separatist rebellion in eastern Ukraine.

Carlsberg chief executive Jorgen Buhl Rasmussen, pictured below, said: “Unfortunately, we believe the eastern European beer markets will be impacted further as consumers are facing increased challenges and this will impact the group’s profits negatively this year.”

Carlsberg’s Baltika beer brand, acquired by the group as part of the break-up takeover, with Heineken, of Scottish & Newcastle Breweries (S&N) in 2008, has the largest chunk of the Russian beer market, but its market share fell 1.2 per cent in the second quarter of 2014.

Yesterday’s profit warning came as Carlsberg revealed that its six-month net profits rose slightly to 2.2 billion kroner (£235m). As conditions became more challenging, revenues in the second quarter only edged up to 19.2bn kroner, from 19.1bn kroner in the same period of 2013.

However, Dutch rival Heineken, which took over S&N’s UK and French operations as part of the joint carve-up with Carlsberg, posted a forecast-beating first half yesterday, with earnings up nearly 10 per cent to €1.45bn (£1.16bn).

This was despite revenues falling 1.4 per cent to €10.2bn, as the brewer was partly hit by the strong euro.

Jean-Francois van Boxmeer, group chief executive, called it “a very good first-half performance”, with revenue and profit growth in most regions.

Beer volumes were up 3.1 per cent, driven by growth in Africa, the Middle East, the Americas and western Europe. There was also an improved second-quarter performance in Asia Pacific.

Outpacing Carlsberg’s performance in the region, the Heineken flagship brand grew more than 5 per cent in central and eastern Europe over the six months.

However, Heineken admitted the Russian market, where it has a 12 per cent market share, remained “quite challenging” due to yearly beer tax increases.