Will 2017 be Carlsberg's comeback year? - Analysis

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Yesterday, Carlsberg released its full-year results for 2016. The brewer saw net profits return after reporting losses in 2015, although sales in the 12 months of last year slipped by 4%. 

Analysts have said Carlsbergs performance could improve in 2017

Analysts have said Carlsberg's performance could improve in 2017

In the client notes that followed, analysts agreed that the company had seen off a difficult 2016. The consensus, however, believes that the outlook for 2017  is "better".

"Carlsberg's 4Q16/2H16 results capped off what has been yet another tough year," said Bernstein's Trevor Stirling. "EPS fell another 15% – compounding falls of 5% and 17% in 2014/15 – and is now back at levels last seen in 2007."

Looking closer at yesterday's results, Stirling noted market share losses in Western Europe, with de-listings at three major retailers in the UK, Poland and Finland. And, while Societe Generale's Andrew Holland highlighted share gains in Russia – full-year volumes were up 1% in a market down 2% – Stirling warned that the brewer's fourth quarter in the country had been "weak", ahead of a PET bottle ban which came into force in January.

"In Asia," added Stirling, "the Chinese beer market continues to suffer from a prolonged slowdown."

But, it wasn't all doom and gloom - CEO Cees 't Hart has high (and high-end) hopes for the Chinese market. Speaking exclusively to just-drinks yesterday, 't Hart said that volumes at the bottom end of beer's price-and-quality pyramid "could continue to go". "But," he added, "it's not quite as important for us as long as premiumisation goes up, and there we feel confident that we are well-positioned."

Looking forward, then, 't Hart's comments are bolstered by several other observations from the analyst community, sparkling optimism for 2017.  

SocGen's Holland said a shift in management training should help drive performance in the year ahead. "The CEO highlighted progress with the strategic realignment of the company, with 4,500 managers trained in the new cultural framework of the company," he said. "This is important, as the previous management failed to gain the cooperation of senior managers in its attempts to improve performance."

Meanwhile, Bernstein's Stirling expects ForEx benefits as well as lower taxes. 

"Management has conservatively guided to mid-single digit organic operating profit growth, along with circa DKK350m benefit from FX, a DKK150-250m benefit from lower interest costs, and a decrease in tax rate from circa 33% to below 30%," he said. "All of which, we estimate, could lead to nearly 30% EPS growth next year."

While the company may be battle-scarred, it could still win the war. 

Carlsberg 2012-2016 - results data - Click here for just-drinks' look at the brewer's five-year performance

Sectors: Beer & cider, Company results

Companies: Carlsberg

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