Carlsberg says 2014 profit to be hit by falling Russia sales

Wednesday 20 August 2014 17.03
Carlsberg generates some 35% of its profits in Russia
Carlsberg generates some 35% of its profits in Russia

Danish brewer Carlsberg said its 2014 operating profit would decline compared to 2013 due to deteriorating conditions in Russia, which generates some 35% of its profits. 

Carlsberg's large exposure to Russia makes it a test case for how European companies are coping with the deepening tensions between Russia and the West and the resulting pressure on the Russian economy. 

It said it now expects operating profit to fall by low- to mid-single digit percentage points against a previous guidance of growth of low single-digit percentage points. It is the second time this year that it had lowered its 2014 guidance. 

The company earned 9.723 billion Danish crowns ($1.74 billion) in operating profit before special items in 2013.

Analysts have said Carlsberg is not so much hurt by Western sanctions on Russia and Moscow's ban on European food, but by the impact that has had on Russia's economy, which may slip into recession this year.

With its Baltika brand ubiquitous in the former Soviet Union, Carlsberg now sees beer sales in Russia falling by high single-digit percentage points and indicated that it may shut down breweries in the East European region. 

"In order to mitigate the risks as much as possible, several changes have been and will be made in our Eastern European business, including structural changes. These include considerations related to brewery closures," it said in a statement.

Aside from consumer spending falling in Russia, Carlsberg faces uncertainty from excise duties which the Russian government may freeze for next year. 

Despite its gloomy outlook, Carlsberg said operating profit rose 6% to 3.6 billion Danish crowns in the second quarter, higher than a forecast for a 3.43 billion profit in a Reuters poll.