* Scraps medium-term EBIT margin guidance for eastern Europe
* Sees 2013 op profit around 10 bln DKK, lagging forecasts
* Q4 operating profit 2.15 bln DKK vs 2.30 bln forecast
* Shares down 6.9 percent
(Adds details on Russia slowdown, comments from CEO and
By Mette Fraende
COPENHAGEN, Feb 18 Danish brewer Carlsberg
has scrapped its profit margin target for eastern
Europe, blaming volatile markets and raw material costs, and
damping hopes the region can offset sluggish demand in western
The world's fourth-biggest brewer said on Monday sales
growth had stalled in its key Russian market and the cost of an
efficiency drive in western Europe would cap earnings growth
this year, sending its shares down as much as 7 percent.
"The change in long-term financial targets is probably the
most disappointing element in the report," said Sydbank analyst
"It helps paint a picture of a brewery which is not entirely
in control of factors which are decisive for earnings," he said.
Carlsberg, like bigger rivals AB Inbev, SABMiller
and Heineken, is relying on emerging markets
to offset weak beer sales in recession-hit western Europe and
help it cope with volatile prices for raw materials like barley,
energy and packaging.
The group has built up a market-leading position in Russia
in the hope its burgeoning middle classes will drive growth and
reduce its reliance on western Europe, which currently accounts
for just over 60 percent of sales.
However, growth rates in Russia have been has been hurt by a
government drive aimed at curbing alcohol abuse, with measures
taken including excise tax increases and a ban on advertising in
all media, including the internet.
"Several events, both within and beyond our control, have
and will continue to impact margins," Carlsberg said as it
scrapped its target for an operating profit margin of 26-29
percent for eastern Europe by 2015. The group made an operating
margin in the region of 21.7 percent in 2011.
Carlsberg did give a longer-term target for average growth
in adjusted underlying earnings per share of more than 10
percent per year.
However, it forecast operating earnings this year would
reach only around 10 billion Danish crowns ($1.79 billion) from
9.8 billion in 2012, lagging an average forecast of 11 billion
in a Reuters poll of analysts.
"The guidance they give for 2013 is not particularly
aggressive." said Alm Brand analyst Stig Nymann. "I don't really
see anything positive."
Carlsberg said an efficiency drive in western Europe, which
includes centrally managing all procurement, production,
planning and logistics, would hurt in the short term.
The revamp, while helping operating margins in the region in
the long term, would cost 300-400 million crowns this year,
400-500 million in 2014 and 500 million in 2015, it said.
Carlsberg, whose brands include Baltika and Tuborg, said
sales growth in Russia stalled in the fourth quarter. That was
better than a broader market decline of 2-3 percent, it said,
but down from growth of about 2 percent in the third quarter.
Chief executive Jorgen Buhl Rasmussen offered little hope
the Russian market would see much improvement this year, citing
restrictions on mobile beer stalls.
"Driven by the short-term interruption from the closure of
sales from non-stationary outlets, we believe a flattish market
is likely," Rasmussen said.
A year ago, Carlsberg replaced the head of Russian division
Baltika Breweries to address slowing sales at that time.
Its market share in Russia fell to 38.3 percent in the
fourth quarter from 38.9 percent in the third, ending a string
of three consecutive quarters of improvement.
Fourth-quarter operating profit before one-off items was
2.15 billion crowns, missing analysts' average forecast of 2.3
Eastern Europe accounted for 4.6 billion crowns of sales, or
around 29 percent, while western Europe accounted for 9.2
billion crowns, or 61 percent.
Last week Heineken, the world's third-largest brewer,
reported higher-than-expected 2012 profit on the back of sharply
increased earnings from Africa and the Americas and forecast
higher volumes and revenue this year.
At 1250 GMT, Carlsberg shares were down 6.9 percent at 561
crowns, the biggest fall by a European blue-chip stock.
($1 = 5.5874 Danish crowns)
(Additional reporting by Teis Jensen; Editing by Ritsuko Ando
and Mark Potter)