Asia "firing on all cylinders" for Carlsberg – Analysis

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Aside from championing good weather and the FIFA World Cup, Carlsberg's full-year 2018 results this week highlighted robust growth in Asia.

Carlsberg performed well in Asia during 2018

Carlsberg performed well in Asia during 2018

Within the brewer's regional priorities - Asia, Western Europe and Eastern Europe - Asia boasted the biggest gains, in both volumes and sales terms. For the 12 months of last year, sales rose 13.3%, while volumes lifted 8.6%.

While the powerhouse of China was singled out as showing "strong growth" for Carlsberg in Asia, India bounced back from a tough 2017. Alcohol companies operating in the country had suffered following a highway ban on alcohol sales as well as tax increases.

Group CEO Cees 't Hart said this week that the brewer's volumes in India last year were up 19%, while "price mix was 7% due to the strong growth of the Carlsberg brand and improved pricing", he added.

"Profitability improved considerably due to the volume growth, positive price mix and supply chain efficiencies following the opening of the Karnataka brewery [in south-west India]."

Elsewhere in Asia, Carlsberg's volumes in Laos grew by high single-digits, driven by market growth not only for beer, but also for soft drinks and water. The Malaysian business delivered share gains, especially in the premium beer category.

In the notes that followed the call, analysts were upbeat about Asia, with Bernstein's Trevor Stirling describing the region as "firing on all cylinders" for Carlsberg. "Every quarter saw strong growth in both volume and price-mix," he wrote.

Jefferies analyst Edward Mundy, meanwhile, said the trajectory of Asia remains attractive. "The 'Big Cities' strategy in China captures the significant premium opportunity and a robust distribution roll-up story," he said, citing Carlsberg's plan to scale up its focus from 20 cities last year to between 30 and 40 in 2019.

In India, Mundy believes Carlsberg still holds "an attractive challenger position, but with sufficient scale to operate".

Carlsberg also flagged its recently-acquired majority control of Cambodian beer JV Cambrew. Hart said on the conference call that the company is "in the process of rebuilding the business". In his subsequent note, Mundy said that "early signs on the turnaround [are] encouraging".

In Vietnam, talks to secure Habeco rumble on, with some suggesting 2020 might be the year the Vietnamese Government sells its share in the state-owned brewery to Carlsberg.

Looking forward, Mundy forecasts Asia as the biggest growth driver for the group, becoming 41% of EBIT by 2020.

Carlsberg Performance Trends 2013-2017 - results data

Sectors: Beer & cider, Company results

Companies: Carlsberg

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