By Gustav Sandstrom
Of DOW JONES NEWSWIRES
Danish brewer Carlsberg A/S (CARL-A.KO) Wednesday posted a stronger-than-expected rise in second-quarter net profit as it boosted margins by cutting costs and raising prices, but it cut its full-year revenue outlook as the economic downturn hit volumes in Russia more than expected.
The brewer said the Russian beer market, the world's third-largest, declined by an estimated 9% in the first half of 2009, although its Eastern European venture, Baltika, increased its market share to 41%, from 38.5% a year earlier. Carlsberg now expects the Russian market to decline 5% to 6% in the whole of 2009, having previously forecast a 2% decline, but said Baltika, Russia's biggest brewer by sales, would grow its market share.
Carlsberg cut its full-year revenue outlook to 61 billion Danish kroner ($12 billion), from about DKK63 billion, but kept its outlook for operating profit of at least DKK9 billion and net profit of at least DKK3.5 billion as it expects cost cutting to offset the revenue decline.
"Both gross margins and operating margins for the region improved considerably, driven by accelerated efficiency improvements, price increases, improved point-of-sales execution, synergies and favourable input costs," Carlsberg said.
The maker of Tuborg, Carlsberg and Kronenbourg beer posted a net profit of DKK1.94 billion for the three months to June 30, up from DKK1.42 billion the previous year and ahead of analysts' expectations for DKK1.48 billion. Overall sales for the period rose marginally to DKK17.62 billion, from DKK17.54 billion, but the figure was below analysts' expectations for DKK17.75 billion.
Analysts said that the results were strong overall, and the stock opened up 4.3% at DKK385.The stock has lost 2% of its value over the past 12 months, outperforming a 22% drop in the wider Copenhagen market due to hopes that its exposure to the Russian beer market will boost earnings in the long term.
Swedbank analyst Jan Ihrfelt, who has a neutral rating on Carlsberg, noted the strength of the company's overall sales volumes, as well as its margins and cash flow. He said the decline in Russia had been expected, and it was positive that Carlsberg was managing to increase its market share there.
Carlsberg's exposure to Russia increased significantly after it bought part U.K.-based rival Scottish & Newcastle PLC last year. The deal gave it full control of Baltic Beverages Holding, which had previously been a joint venture between the two companies.
Although Russian beer consumption has increased rapidly in the past few years, the steep economic downturn there has hit consumer spending and beer volumes are now in decline.
Last week, Carlsberg's rival SABMiller PLC (SAB.JO) also said lager beer volumes in Russia fell 9% in the three months to June 30 from the previous year, although it managed to maintain its market share.