Carlsberg still confident of Russia growth after third-quarter downturn

Danish brewer Carlsberg A/S is confident of a return to growth in key markets in Russia after regulations to curb alcohol abuse dented third-quarter results, although western European markets may not pick up for a year or two.

Posting a 4.7 per cent drop in quarterly operating profit yesterday, the world’s fourth-biggest brewer whose brands include Baltika, Tuborg and Kronenbourg said there was no reason yet to expect a return to growth in western Europe.

“There is nothing for us that indicates that consumers and the macro economies (in western Europe) will be much better in the short term, or in the next year or two,” chief executive Jorgen Buhl Rasmussen said.

But he said he was certain there would be growth again in Russia. “It is a question of when. This market certainly has growth potential,” Rasmussen said by phone, adding he expected Russians to continue replacing their consumption of alcohol with beer and wine.

Like its rivals, Carlsberg has expanded into emerging markets to counter slow growth in western Europe, but Russia, once the main growth driver, has been hit by government measures to curb alcohol abuse. The group said it expected the Russian beer market – hampered by restrictions on the amount of beer which can be sold by stalls and kiosks and a ban on alcohol sales after 11.00 pm – to decline by a high single-digit percentage this year, against a previous forecast for a mid single-digit percentage decline.

“The kiosk closures are having a much worse effect than we had expected,” said Rasmussen. Its shares traded up 2.3 percent by 1213 GMT as the brewer stuck to its 2013 financial guidance, which some investors had expected could be cut.

“It is still looking grim for Carlsberg,” said Alm Brand analyst Michael Jorgensen. “It is looking grim in eastern Europe and we saw a little weakness in Asia which is their only growth driver.” – (Reuters)