BALTIC, NORDIC, & CIS TRADE 2006 - Carlsberg profit rises three percent, to shut plant

By: | at 07:00 PM | Channel(s): International Trade  

Brewer Carlsberg posted a three percent operating profit rise, despite stagnant traditional markets, and said it expected a further increase this year, driven by growth in Russia, Eastern Europe and Asia.
Shares in the Danish brewer fell as much as four percent recently in what analysts said was a reaction to weak margin development in saturated western European markets and softer-than-expected 2006 profit guidance.
“In these markets with no top-line growth, margin improvement should come from getting costs down, and this has not been the case,” said Jyske Bank analyst Casper Runge Albaek, who maintained his “Buy” rating on Carlsberg shares.
In an expected attempt to cut production cost in Denmark, Carlsberg said it would close most of its brewing activities in Copenhagen and invest 800 million Danish crowns ($127.8 million) in expanding a plant in western Denmark by the end of 2008.
“The results are in line with our expectations, but the most important thing is the closing of the Valby (Copenhagen) plant,” said BNP Paribas analyst Nikolaas Faes.
“Because Carlsberg is the most inefficient brewery in Western Europe, the closing indicates that the company really is starting to focus on this problem.”
Carlsberg has been facing stagnant western European markets for years and now generates 50% of operating profit from growth areas in Eastern Europe and Asia.
Not satisfied
“We are not satisfied with Western Europe, but, as you can see, we are taking determined steps to counter this, and we expect the situation to improve during 2006,” Carlsberg Chief Executive Nils Smedgaard Andersen told a telephone conference.
Carlsberg said the transfer of production is expected to bring annual efficiency gains in the region of 130 million crowns and will affect 240 jobs in Copenhagen.
Carlsberg owns 50% of East European brewer Baltic Beverages Holding (BBH), which operates in six eastern European markets—Russia, Ukraine, Kazakhstan and the Baltics.
Carlsberg said it expected an operating profit of 3.6 billion crowns this year, in line with the average forecast given in the poll. The company said the comparable figure for operating profit in 2005 was 3.3 billion.
Sales last year rose to 38 billion crowns from 36.3 billion in 2004, slightly above a market forecast of 37.8 billion. The firm said it would propose a dividend of 5 crowns per share for last year, unchanged from 2004.
Carlsberg said it had not yet noticed any sales impact from the boycott of Danish products taking place in several Muslim countries following the controversial publication of cartoons of the Prophet Mohammad. It has no sales in many Middle Eastern countries, but it does have a presence in Malaysia, where it is the market leader, and Indonesia. (Reuters)

American Journal of Transportation