Carlsberg sold its stake in Carlsberg Malawi earlier this month

Carlsberg sold its stake in Carlsberg Malawi earlier this month

Yesterday, Carlsberg reported a 25% leap in half-year net profits despite tough trading environments in several of its key markets.

In its official statement, the brewer took the time to update investors on the progress of its 'Funding the Journey' cost-saving initiative. CEO Cees 't Hart picked out a few highlights from the first six months of this year, including the closure of several breweries in China and the end of its logistics business in the UK. The period also saw the group's white-collar head-count reduced by 2,080 and the company cut 2,107 SKUs in a bid to improve supply chain efficiencies.

Beyond the six months, recent progress includes the sale of its Vietnam brewery Vung Tau as well as the divestment of its 59% share in Carlsberg Malawi. "In line with Carlsberg Group's new strategy, we have evaluated all businesses in order to focus our efforts against a narrower and more precisely-defined set of priorities," said EVP Asia, Graham Fewkes earlier this month.

As the brewer continues to shed assets and tighten its belt, analysts are looking to track the firm's progress. Bernstein's Trevor Stirling said the cost-cutting programme is "achieving traction", while Barclay's analyst Simon Hales said: "The process of putting Carlsberg back on the path to higher and consistent sales/earnings growth is well underway". 

However, both analysts suggest the journey is more a marathon than a sprint. 

The need for re-investment is clear, says Stirling, both to protect existing business and to try to overcome Carlsberg's relatively-challenged geographic footprint. 

For Hales, 2016 remains a year of transition for Carlsberg. He also believes the UK's decision to leave the European Union could spell trouble for the brewer. "With some risk that a weakening macro backdrop in Europe (post-Brexit) could prompt volume disappointment in estimated-2017, and without earnings upgrades, it's tough to see a catalyst for the shares for now," he says.

The EU Referendum - The UK's departure and its consequences for the drinks industry

The notion of a 'catalyst' also came up in Stephen Simpson's article on Seeking Alpha. Simpson believes that, when done correctly, turnarounds can unlock growth potential. He highlights the scope for improvement in Russia, "fine tuning" in Western Europe and room for better performance in Asia. 

But, he remains unconvinced that there is a "real growth opportunity out there that the company can tie its wagon to." For Simpson, a big turnaround in Russia doesn't appear likely, nor does he see Carlsberg "having the dynamism today to disrupt markets like China or India in a big way". 

The finish line for Carlsberg's return-to-form, then, is still some way off.