The Danish drinks giant Carlsberg came out with Q4 reports and missed the market expectations in all three regions. The company, however, maintained that in spite of 6% drop in the sales in the last quarter of fiscal year 2016, overall the year was good for them.
Cees’t Hart, the CEO of Carlsberg said, “At the end of quarter four, Russia was a bit weak – that has a cause (with there being) a ban on big bottles.” As the ban started from 1st January 2017, they had to get ready for it and the preparations started in the second half of 2016 itself.
For the fourth quarter, the company did not disclose the earnings figures, but the sales figure was given as 24 billion kroner, which is equivalent to $3.5 billion. The full year profit was a shade better at 4.49 billion than the analysts’ expectation of 4.46 billion Danish crowns. The brewer also beat the market expectation on the dividend front by proposing 10 crowns per share against the expectation of 9.47 crowns.
Following the result announcement, Carlsberg’s shares dropped in midday trading by 2.4 percent at Copenhagen to trade at 615.5 kroner.
The sales of this world’s third largest brewer dropped in Eastern Europe by 2.5%. In this region, Russia is its main market, which accounts for a fifth of its sales.
Stricter rules in Russia defining how the alcoholic drinks should be sold in the country are further going to make a dent in the company’s earnings this year. The law is passed in the country to limit the size of the beer bottle to 1.5 litres as the country wants to curb alcohol abuse. This law simply translates to a 5% reduction in beer sales in the country for Carlsberg.
For Carlsberg, it has been a long struggle in Russia mostly due to sales and advertising restrictions. Since the time Carlsberg took over Russia’s largest beer brand Baltika in the year 2008, it has been facing problems. These problems are mostly due to tax hikes by the government to dissuade drinking, tighter alcohol regulations and over and above that the weak economy of the country.
In its Q3 results, the brewer had reported a sharp rise in sales figures, which helped it in gaining a market share from its global rivals Heineken and Anheuser-Busch InBev. The company is hopeful of its operating profit to rise by mid-single digit in 2017.