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Current Position:Home » News » Beverages & Alcohol » Alcohol » Topic

Russian Difficulties For Beer-Makers

Zoom in font  Zoom out font Published: 2014-08-21  Origin: esmmagazine  Views: 45
Core Tip: Carlsberg and Heineken two of the world’s top four brewers, signalled tougher times ahead for the beer industry as escalating political tensions in eastern Europe weigh on the region’s economy.
Carlsbergbrewer and Heineken two of the world’s top four brewers, signalled tougher times ahead for the beer industry as escalating political tensions in eastern Europe weigh on the region’s economy.

Carlsberg, Russia’s biggest brewer, cut its full-year forecasts for revenue and earnings even as second-quarter profit beat estimates, causing the shares to slump. Heineken said it expects growth to moderate in the remainder of the year, though the shares surged after the Amsterdam-based company posted profit in the first half that topped estimates.

Across the globe, beer companies are under pressure as drinkers shift to rival craft brews and increasingly trade up to spirits. The recent political tensions between Russia and its western trading partners has added to difficulties in a country where government measures to reduce drinking have been hurting sales for longer than a year. Russia represents more than a third of Carlsberg’s total selling volume.

“Conditions are difficult and apparently getting worse,” Frans Hoyer, an analyst at Jyske Bank, said by phone. “Rather than finding some type of stabilization now given several years of volume decline it looks we are in for another bout of decline in the next several quarters in Russia.”

Carlsberg fell as much as 6.9 per cent in Copenhagen and was down 5.2 per cent at 511.5 Danish kroner as of 9:06 a.m. Heineken rose 7 per cent to €56.58 euro in Amsterdam.

Carlsberg said operating profit on a so-called organic basis will rise at a low- to mid-single-digit pace for the year, less than its previous guidance for high-single digit percentage growth. The Copenhagen-based maker of Tuborg also forecast steeper drops in reported operating profit and net income than it had previously indicated.

‘Increasingly Challenging’

“Due to the recent macro events the consumer sentiment and the outlook for some of the economies in eastern Europe are becoming increasingly challenging and uncertain,” Carlsberg said in a statement. “Consequently, we believe that the beer category will deteriorate further in the second half of the year. In addition, we expect considerably less stocking among distributors in Russia.”

Heineken, the world’s third-biggest brewer, said growth in revenue per hectoliter of beer sold and profit will slow in the second half from the first six months as some countries lag. The Dutch company still anticipates stronger sales in 2014.

“The economic outlook remains mixed,” Chief Executive Officer Jean-Francois van Boxmeer said in the statement.

Higher Profit

At Carlsberg, the volume of beer sold in eastern Europe declined 13 per cent in the second quarter on an organic basis, which excludes acquisitions and divestments. Higher prices in the region limited the drop in net revenue to 4 per cent.

The Russian beer market contracted by 6 per cent to 7 per cent in the first half and the Danish company said its share of that declined by 1.2 percentage points to 37.4 per cent.

The brewer reaffirmed its commitment to Russia, saying it continues to invest in its brands there and to maintain a high level of commercial activities.

Carlsberg reported a 5.9 per cent gain in earnings before interest, taxes and one-time items in the quarter to 3.6 billion Danish kroner ($643 million). The average of 10 analyst estimates compiled by Bloomberg was for 3.38 billion kroner.

At Heineken, quarterly earnings before interest and taxation rose 9.6 per cent to €1.45 billion euro ($1.93 billion), excluding some items. The median of 13 estimates compiled by Bloomberg was for a figure of €1.32 billion.

 
 
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