Carlsberg's knack for showing up at the wrong parties is hurting sales. The Danish brewer's first-half revenue missed expectations. Operating profit rose eight per cent, but that was entirely wiped out by currency swings. While a new cost-cutting strategy is starting to bear fruit in improved operating profitability, the group remains hampered by some of the world's trickiest beer markets.
Around a quarter of the 2 billion kroner ($302 million) of cost cuts targeted by Chief Executive Cees 't Hart will come out this year. But, the uptick in the group's underlying operating profit is nixed by Carlsberg's exposure to volatile currencies like the Russian rouble. Russia and Ukraine remain challenging, with flat beer volumes. Carlsberg was hit by an alcohol ban in the Indian state of Bihar, and a lack of presence in the Americas means it is missing out on revelry in Brazil and Mexico, where rival Heineken's brands are experiencing double-digit growth.
Even Asia, where Heineken reported 11.6 per cent growth in the same period, is letting Carlsberg down. Around 50 per cent of its revenue there comes from China, according to Bernstein, where sales are slowing sharply. The company said it will close 11 unprofitable Chinese breweries.
Plans to cut 2,000 jobs and drain unnecessary costs will help shore-up the group's operating profit margin, which was 12.9 per cent in 2015. Total shareholder return has been 67 per cent since 2010, around half the return at Heineken and a third of what Anheuser-Busch InBev has managed. Carlsberg currently trades 10 per cent below peers on a price-to-forward-earnings multiple. Until it looks like it's mixing in the right circles, even that may be a little generous.
Around a quarter of the 2 billion kroner ($302 million) of cost cuts targeted by Chief Executive Cees 't Hart will come out this year. But, the uptick in the group's underlying operating profit is nixed by Carlsberg's exposure to volatile currencies like the Russian rouble. Russia and Ukraine remain challenging, with flat beer volumes. Carlsberg was hit by an alcohol ban in the Indian state of Bihar, and a lack of presence in the Americas means it is missing out on revelry in Brazil and Mexico, where rival Heineken's brands are experiencing double-digit growth.
Even Asia, where Heineken reported 11.6 per cent growth in the same period, is letting Carlsberg down. Around 50 per cent of its revenue there comes from China, according to Bernstein, where sales are slowing sharply. The company said it will close 11 unprofitable Chinese breweries.
Plans to cut 2,000 jobs and drain unnecessary costs will help shore-up the group's operating profit margin, which was 12.9 per cent in 2015. Total shareholder return has been 67 per cent since 2010, around half the return at Heineken and a third of what Anheuser-Busch InBev has managed. Carlsberg currently trades 10 per cent below peers on a price-to-forward-earnings multiple. Until it looks like it's mixing in the right circles, even that may be a little generous.