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"The door is open" for guidance upgrades - Carlsberg H1 2019 - Analysis

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Good news from several Asian markets - as well as continued success with cost savings - contributed to a positive first six months of this year for Carlsberg.

Cees t Hart celebrates his fourth anniversary as Carlsbergs CEO this year

Cees 't Hart celebrates his fourth anniversary as Carlsberg's CEO this year

Late last week, the Danish brewer said that Asia was its best performing reporting region in the first half of 2019, with sales leaping 14.5% year-on-year. The group saw its total sales in the six months rise by 4.2%.

Taking a closer look at Carlsberg's performance in Asia, Jefferies analyst Edward Mundy said in a note to clients that the trajectory continues to look attractive, highlighting a handful of countries. "The Big Cities strategy in China targets the significant premium opportunity with an attractive distribution roll-up story - from 20 cities in full-year 2018 to 30 to 40 in 2019," Mundy wrote. "In Cambodia, Carlsberg now has control of the business with early signs on the turnaround encouraging.

Carlsberg and Heineken in Cambodia - What just-drinks thinks

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

Bernstein analyst Trevor Stirling noted in his note that both Vietnam and Laos "were strong" for the brewer. He also noted that Carlsberg's profits in Asia jumped by 35.5% in the first half, "driven by operating leverage and cost control".

On the subject of cost controls, both analysts underscored the brewer's ongoing cost-saving initiatives, with Mundy calling the schemes "part of everyday life" at Carlsberg. "Although Carlsberg has not provided official new cost savings beyond 'Funding the Journey' (which finished in 2018), strong delivery in H1 points to continued self-help levers that will also provide oxygen for reinvestment to grow the top-line," he said.

In terms of operating expenses, Stirling described cost controls as being "strong", although he also noted that "margins were flattered by the phasing of marketing expense which will be higher H2".

After a strong start to 2019, Mundy cautioned that the company has a track record of under-promising and over-delivering - and has upgraded its guidance every year since CEO Cees 't Hart came on board in 2015.

"We see the door open for further upgrades through the year," he says.

In a game of two halves, the Danish brewer has still a lot to play for this year.

Carlsberg Performance Trends 2014-2018 - results data


Sectors: Beer & cider, Company results

Companies: Carlsberg

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