Carlsberg's Russian sales hit by taxes

WEAKNESS IN Carlsberg’s Russian markets led the Danish brewer to report a worse than expected 80 per cent fall in pre-tax profits for the first quarter.

Russian sales were hit by the combination of spiralling taxes designed to curb alcoholism and intense competition, which led the company to report a 98 per cent fall in operating profits from its eastern European division.

Carlsberg had received a sales boost at the end of last year as Russian suppliers and consumers stocked up ahead of a 20 per cent new year tax increase, this impacted heavily on the first quarter.

Shares in the company bounced 4 per cent to 487.90 Danish kroner in early trading, however, as the group also announced that despite the profit fall, market share in Russia had increased slightly from 36.8 per cent in the previous quarter to 37 per cent.

This follows several years of declining market share in the region. “Everyone thought that there was no good news from Russia but the stabilisation of underlying market volumes as well as of Carlsberg’s market share suggests that the situation in the region is slightly better than we thought,” said Ian Shackleton, analyst at Nomura. Revenues rose 2.8 per cent to Dkr2.9 billion overall as sales grew in Europe and Asia. But earnings per share still fell from Dkr1.1 to a loss of Dkr0.5 in the quarter as margins in eastern Europe fell 13 percentage points to less than 1 per cent.

Jørgen Buhl Rasmussen, chief executive, said: “In the traditionally small first quarter of the year, the group delivered continued solid growth and performance in northern and western Europe and Asia, while destocking impacted our Russian results as expected.”

Group beer volumes fell 4 per cent in the period, but adjusting for the destocking effect in Russia, beer volumes grew organically by 2 per cent thanks to strength in Europe and Asia. Sales in Asia rose 14 per cent and operating profit rose 13 per cent.

Russia accounted for about 30 per cent of Carlsberg’s beer sales in the quarter and the Danish group has invested more than $12bn in the country since the 1990s and this year said it was to buy its Russian subsidiary Baltika. – (Copyright The Financial Times Limited 2012)