Malaysia: Carlsberg Brewery Malaysia poised to deliver strong results for Q4 ended December 31st

Carlsberg Brewery Malaysia Bhd (Carlsberg Malaysia) is poised to deliver seasonally strong results for the fourth quarter ended Dec 31, 2024 (4Q24), potentially marking a record full-year performance, according to UOB Kay Hian (UOBKH) Research, The Star reported on January 31.

The research house expects the early Chinese New Year this year to boost sales volume, as orders are front-loaded into 4Q24.

“While sales volume is already expected to pick up seasonally, the early Chinese New Year celebrations in 2025 should result in stronger sell-in for the brewers as orders are front-loaded into 4Q24.

“Earnings for the period should see an uptick, both sequentially and year-on-year (y-o-y), although margins are likely to be slightly compressed by an increase in festive marketing spend,” the research firm said.

“The anticipated uptick in sales and strong results thus far signals a record year for Carlsberg Malaysia.”

However, it noted that sales volume would likely normalise downward in 1Q25.

The immediate outlook for 2025 remains clouded by mixed signals in discretionary spending, the research firm pointed out.

On the downside, it said the removal of broad-based subsidies in favour of a targeted approach could dampen consumer spending, particularly among the middle-to-upper-middle income group.

“This could slow Carlsberg’s premiumisation efforts, resulting in potential margin compression should consumers tighten their purse strings,” it added.

On the flip side, UOBKH Research noted that the minimum wage increase to RM1,700, effective February, could support consumption of Carlsberg Malaysia’s more affordable products, such as its Carlsberg brand. Moreover, the ongoing recovery in the tourism sector could also bolster Carlsberg’s performance.

UOBKH Research highlighted that as of November 2024, tourist arrivals in Malaysia had already exceeded full-year 2023 figures by 11.5%.

“While the sector has yet to fully recover to its pre-pandemic heights, an uptick in tourist spending should benefit Carlsberg’s sales volume, especially for the on-trade segment which had slowed down post pandemic as consumption patterns shifted away from on-premise drinking” it said.

“Recall that while historically the volume split between on-trade and off-trade was 60-40. This was reversed after Covid-19 and the on-trade segment has still yet to fully recover.”

Operationally, UOBKH Research said Carlsberg Malaysia appears to be “solid”, supported by stable raw material pricing and US dollar-to-ringgit exchange rates.

It expects the brewery’s 5% price hike in April 2024 to also provide a margin buffer in case of unexpected cost increases.

“However, we expect marketing costs to sustain at current levels with Carlsberg Malaysia consistently guiding that it will continue pushing marketing initiatives to grow its market share,” it noted.

Meanwhile, following the RM92mil brewery upgrade completed in its financial year 2024, the research firm expects Carlsberg Malaysia’s capital expenditure to normalise and return to a maintenance cycle moving forward.

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