Denmark: Carlsberg A/S posted Q1 2005 Financial Results

Danish brewing giant, Carlsberg A/S, announced on May 10 that its global beer volume showed a 20% increase in the first quarter of the year driven by strong organic growth in BBH as well as a considerable contribution from acquisitions, including Holsten and the Chinese breweries. Organic growth was 5%.

Net revenue totalled DKK 7.4bn, corresponding to an increase of 9%. Operating profit (EBIT) was minus DKK 22m (DKK 137m in Q1 2004), including Holsten's anticipated seasonally related negative contribution to profit.

As expected, Carlsberg A/S' share of profit totalled minus DKK 319m (not directly comparable to last year due to changes in company structure). Carlsberg A/S' share of profit for the year is expected to increase by approx. 15% (DKK 1,100m in 2004). Expectations for 2005 thus remain unchanged.

In general, the brewing industry is affected by significant seasonal fluctuations in consumption and demand. Seen together with the operational and financial gearing of the Carlsberg Group, this means that the profit of the year's first quarter is not indicative of the expected development in consolidated profit for the year.

The pro rata calculated beer volume totalled 13.6m hl (11.3m hl in 1Q, 2004), corresponding to an increase of 20%, of which organic growth accounted for 5%-points. The soft drink and water business reached a total volume of 4.0m hl, corresponding to a 5% decline.

The implementation of the efficiency initiatives under the Operational Excellence programme is proceeding according to plan. The programme is still expected to result in efficiency improvements in accordance with the previously stated financial goals, i.e. a total of DKK 800m annually by end-2006.

In total, the Western European beer markets are estimated to have experienced a decline in volume of approx. 5% during the first quarter of the year. In Western Europe, total beer volumes of 5.7m hl were realised, corresponding to a 21% increase. When excluding the acquisition of Holsten, beer volumes were 3% down on the corresponding period last year, and Carlsberg's development in sales was thus slightly up on the general market development. The development in organic revenue totalled minus DKK 201m (-4%) primarily as a result of reduced sales in January and February. Operating profit totalled minus DKK 87m (DKK 119m in Q1, 2004).

The decline in profit was primarily attributable to the weak markets in January and February. Furthermore, Q1 this year includes a negative profit contribution from Holsten of minus DKK 44m (last year, operating profit in Holsten in Q1 amounted to approx. minus DKK 75m, however, the company was not included in the accounts until Q2, 2004). The Holsten integration and business development is proceeding according to plan.

Total operating profit in the Nordic region was down on last year. In Denmark, the re-launch of the well-known old Carlsberg beer bottle is expected to increase sales. In Carlsberg Sweden, several important steps have been taken to create a healthy and profitable business, including price increases mainly in the discount segment as well as cost adjustments, i.a. through staff reductions. The Swiss market - particularly the on trade segment - was adversely affected by the lowering of the blood alcohol levels allowed when driving.

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