Carlsberg upbeat on Q1, but analysts not so sure

Carlsberg upbeat on Q1, but analysts not so sure

Carlsberg's senior management has said that it is pleased with the brewer's momentum, despite analysts' muted response to the group's first quarter figures.

Analysts reacted with some disappointment to news today (11 May) that Carlsberg's first quarter profits were lower than expected and that a strong rebound in beer sales in Russia did not translate into higher margin expansion.

The group's net profits sank by 63% to DKK173m (US$33.4m) for the three months to the end of March, but were made to look worse by a DKK390m one-off gain in the same period of 2010. However, beer sales in Russia rebounded from a collapse in the first quarter of last year, helping Carlsberg to report net sales in the first three months of 2011 up by 14%, to DKK12.5bn. Operating profits leapt by 38% to DKK1bn.

On the brewer's conference call, CEO Jørgen Buhl Rasmussen told analysts that the group remains on-track to meet its full-year targets. He sought to allay fears about rising input costs and said that Russia, which is key to Carlsberg's financial fortunes, continues to recover from a three-fold hike in beer duty tax in 2010.

"We certainly expect the mix trend to improve ... to flat or slightly positive," he said of Russia's beer market, which Carlsberg expects to expand by between 2% and 4% in volume in 2011 following two years of heavy declines.

The group highlighted that the first quarter is, historically, its smallest in terms of financial impact.

But, it was not enough for some analysts, despite the brewer's net sales having beaten conensus estimates by 4%. "Overall, Q1 results were disappointing, particularly in Russia," said Sanford Bernstein, in a note entitled: "Did the rollercoaster derail?"

"With organic volume growth of 28% and 18% price-mix in Eastern Europe, the company only delivered a more than modest 30 basis points expansion in operating margin," Bernstein said. "What will happen in the next quarters when they there will be minimal operating leverage and the technical boost to price-mix fade away?"

Asia continud to build its contribution to Carlsberg's numbers during the first quarter, underlining why the brewer is on the lookout for acquisitions there. Its beer volumes in Asia rose by 15%, driven by China and India, with net sales up by 30% to DKK1.2bn.

Western Europe, meanwhile, was again a drag on group volumes, which declined by 3% in the region over the three months. That said, higher prices meant that net sales in Western Europe were flat and cost savings drove operating profits in the region up by 7%.

Carlsberg's share price recovered from an early fall to show a rise of around 3% for the day at 15:30 local time on the Copenhagen Stock Exchange.

To read just-drinks' exclusive interview with Carlsberg's CEO, published last month, click here.