DENMARK: Carlsberg profits fall in full year

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The Danish brewer Carlsberg today reported a fall in profits despite a rise in net revenue of 4% as volumes increased by more than 10m hectolitres to 92m hl. The comany admitted that several of its markets are "experiencing intensified competition".

Full year revenues totalled DKK36.0 billion. Operating profit, however, fell 3% to DKK 3,442m. Profits before tax also fell, from DKK2,688m in 2003 to DKK2,062m for 2004.

Sales in the mature Western European markets were flat, unless the acquisition of Holsten-Brauerei, is included, in which case they were up 19% to 28.1m hl.

There was an organic decline of 6% in revenue for the region, which the company said was explained by lower beer prices and the divestment of the mineral water activities in Switzerland in 2003 as well as a negative trend within soft drinks.
The company said it was boosted by sales around football competition Euro 2004, particularly in the UK, where it achieved considerable volume growth. The integration of Holsten-Brauerei's UK activities also contributed to a positive development.

However, it struggled in Sweden where structural changes in the market, including growing illegal imports of beer, made conditions difficult, and an unsuccessful pricing strategy led to losses.

Carlsberg was also boosted by a strong showing by its Eastern European joint venture with Scottish & Newcastle, Baltic Beverages Holding (BBH), which showed 19% progress in net revenue, totalling DKK 5,121m.

The company said the Italian market contracted due to poor summer weather and, consequently, Carlsberg's sales decreased. "The important summer season led to financial difficulties for a number of customers, and Carlsberg Italia was forced to make significant write-downs of trade receivables," a statement said.

Eastern Europe exclusive of BBH realised net revenue of DKK 2,877m, corresponding to a 5% decline which is mainly attributable to a decrease in revenue in Turkey.

In Asia, net revenue totalled DKK 1,463m, including revenue contribution of DKK 110m from the undertakings acquired during the year.

Looking forward the company said it anticipates positive growth in volumes as a result of organic growth in both BBH and the other Eastern European business units and the acquisitions in Germany and China. Based on actual exchange rates, net revenue is therefore expected to increase to approximately DKK 38bn.

Operating profit (EBIT) is forecast to be around DKK 3.4bn.

"Brewing activities are expected to generate substantial growth due in part to positive contributions from the Operational Excellence programme and operational improvements in Sweden and Italy, in particular. The Group's other activities, comprising gains from divestment of properties and costs at the Parent Company, are expected to be around nil against DKK +441m in 2004," a statement said.

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