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UPDATE 2-Carlsberg Q1 doubles on E. Europe gains, cost cuts
May 6, 2009 / 7:09 AM / 8 years ago

UPDATE 2-Carlsberg Q1 doubles on E. Europe gains, cost cuts

* Operating profit 788 mln DKK, slightly above consensus

* Boosted by Scottish and Newcastle stake

* Still sees FY operating profit above 9 bln DKK

* Market share rises in Eastern Europe

* Shares up 9 pct

(Adds analyst, company comments, background, updates share)

By Anna Ringstrom and Teis Jensen

COPENHAGEN, May 6 (Reuters) - Carlsberg (CARLb.CO) said it doubled operating profits in the first quarter, ahead of expectations, as its market share grew in Eastern Europe, boosting its shares.

The world’s fourth-largest brewer said on Wednesday that its operating profit rose to 788 million crowns ($142 million) from a year-earlier 388 million, as it pressed ahead with cost-cutting programmes. This compared with a mean forecast in a Reuters poll for 785 million crowns.

The results were helped by Carlsberg’s acquisition in April 2008 of half of British rival Scottish and Newcastle, including Baltika, the leading brewer in Carlsberg’s key growth market Russia.

Carlsberg, which brews Tuborg, Holsten, Baltika and Kronenbourg beers as well as its own brand, said its group operating margin was 6.7 percent, up from 4.1 percent. The margin at the Eastern Europe unit was 20.1 percent.

“Carlsberg prove they are really on top of their business. Their efficiency programmes are having an effect so the operating margin is better than I had expected,” said Morten Imsgaard, analyst at Sydbank.

Group sales in the quarter -- the slowest of the year for brewers -- rose to 11.8 billion crowns from a year-ago 9.44 billion, versus an expected 12.1 billion.

Carlsberg said markets had been challenging but it repeated its outlook for full-year 2009 operating profits above 9 billion crowns and sales at around 63 billion.

Beer drinking has traditionally been seen as relatively resilient to economic downturns, but conditions have become dire also for brewers in the current global crisis, and many -- including Carlsberg -- are cutting costs.

The firm said it gained market share in its growth markets of Eastern Europe and Asia in the quarter. Its market share on its biggest, but saturated, Western European market had been unchanged.

Jyske Bank analyst Jens Houe Thomsen said market share gains in Eastern Europe, Russia in particular, were positive but no surprise ”as we have seen competitors complain a bit about their developments there.

”It`s also good we still don`t see Russians buying the cheapest beer, but that they keep the mix at the moment.

Carlsberg said it saw the Russian market shrinking by 2 percent this year but its market-leading Baltika brand maintaining volumes in 2009. It said Baltika grew its market share in Russia to 39.9 percent in the quarter, from 38.4 percent in 2008.

“We have no indications that Russian consumers are moving towards cheaper beer. They are on the contrary faithful to the brands they buy, especially in crisis times,” Chief Financial Officer Jorn Jensen told a news conference.

Carlsberg said its total beer volumes increased by 34 percent. In Eastern Europe, core volumes fell 5 percent, while including acquisitions the rise was 78 percent.

“That’s substantially better than for Heineken, so there you see the effect of Carlsberg being market leader in Russia,” Sydbank’s Imsgaard said.

World no.3 brewer Heineken (HEIN.AS), which bought the other half of S&N last year, last month posted a bigger-than-expected drop in volume of beer shipped in the quarter and said the impact and duration of the downturn remained unclear. [ID:nLL709350]

Shares in Carlsberg were up 9 percent to 288.50 crowns at 1123 GMT while the DJ Stoxx European food and beverage index .SX3P was up 1 percent. Year-to-date, Carlsberg is up 70 percent while the index is down 3 percent.

SABMiller SAB.L, the world No. 2 brewer sold less beer than expected in the first three months of 2009 as demand fell in most of its markets, it said last month. [ID:nLF155405]

The world’s largest brewer is Anheuser-Busch InBev INTB.BR, brewer of Stella Artois, Beck’s and Budweiser. ($1=5.562 Danish Crown) (Additional reporting by Martin Dahl, editing by John Stonestreet and Hans Peters)

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