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Danish brewing giant Carlsberg has upgraded its full year earnings expectations after strong revenue growth and margin improvement in the first half of the year.
Carlsberg posted organic net revenue growth of 4.2% in the period after a second quarter revenues growth of 2.6%.
Reported net revenues were up 6.5% in the first half to DKK33bn, helped by the impact of its Cambrew acquisition and positive currency movements.
Group beer volumes grew organically by 0.6%, driven by continued strong volume growth in Asia.
Tuborg, its largest core beer brand, grew by 4%, supported by good growth in China and India, while Carlsberg brand volumes declined by 3%, with growth in markets such as Russia, Malaysia and Vietnam offset by declining volumes, most significantly in the UK.
Excluding the UK, Carlsberg brand volumes were slightly up, with particularly good volume and value growth for local power brands in Asia, including markets such as China, Laos and Vietnam.
Its craft & speciality portfolio delivered growth of 17%, with particularly strong growth rates in Asia and Eastern Europe. 1664 Blanc grew volumes by 29%, with markets such as China, Malaysia, France, Denmark, the Baltics, Russia and Ukraine performing particularly well.
Non-beer volumes grew organically by 5.5%, mainly driven by Denmark, Finland, Poland and Laos.
Total volumes grew by 1.4% organically.
Price/mix was up 3% in the period, supported by the growth of craft & speciality and alcohol-free brews and our value management initiatives, including price increases.
Gross profit was up organically by 3%, as Carlsberg was was able to more than compensate for the 4% organic cost/hl increase. Reported gross margin declined by 110 bps to 49.5%, due to the higher input costs and the consolidation of Cambrew, which currently has a gross margin significantly lower than the Group average.
Operating profit before depreciation, amortisation and impairment losses (EBITDA) grew by 12.4% organically and by 13.3% in reported terms, positively impacted by IFRS 16. Excluding the impact of IFRS 16, organic growth in EBITDA would have been around 10%.
Reported operating profit was DKK5.2m, represented a growth rate of 18.2%.
After the strong performance Carlsberg has upgraded its full year earnings expectations.
It now expects high-single-digit percentage organic growth in operating profit, a translation impact on operating profit of around DKK100m and financial expenses, excluding currency losses or gains, are expected to be around DKK 700m (previously DKK 700-750m).
It has also announced a DKK 2bn share buy-back, which is the second tranche of its 12-month DKK4.5bn share buy-back programme announced in February 2019.
CEO Cees ’t Hart commented: “We delivered a strong set of results for the first six months of 2019, with healthy top-line development, strong margin improvement and continued solid cash flow.
“We’re pleased that last week we were able to adjust our earnings outlook upwards due to the performance in the first half and a solid start to Q3, and despite tough comparables. The earnings upgrade is yet another proof point that the execution of our SAIL’22 priorities is driving sustainable, long-term value creation for the group.”
Carlsberg shares are up 5.7% to DKK1,004 in Denmark this morning - their highest ever level of trading.
Morning update
On the markets this morning, the FTSE 100 has continued its slide following yesterday’s slump, dropping a further 0.3% to 7,124.8pts.
Risers so far include PayPoint, up 2.8% to 924p, Stock Spirits (STCK), up 2.6% to 235.5p, Glanbia (GLB), up 2.5% to €11.18, FeverTree (FEVR), up 2% to 2,132.8p and Naked Wines (WINE), up 1.8% to 280.5p.
Early fallers include McBride (MCB), down 3.7% to 61.1p, Hotel Chocolat (HOTC), down 1.5% to 367p, Sainsbury’s (SBRY), down 0.9% to 183.8p and Morrisons (MRW), down 0.7% to 180.7p.
Yesterday in the City
The FTSE 100 sank 1.4% back to 7,147.9 on global fears over economic growth and concerns about recessionary indicators in a number of key global markets.
Amongst those shares hardest hit yesterday were McColl’s (MLCS), down 10.1% to 56.8p, while drinks mixer brand FeverTree (FEVR) fell back 5.3% to 2,092p.
Also down were Glanbia (GLB), falling 4.3% to €10.91, Nichols (NICL), down 4.3% to 1,800p and DS Smith (SMDS), down 3.7% to 320p.
FTSE 100 names on the slide included Compass Group (CPG), down 1.5% to 2,020p, Associated British Food (ABF), down 2.1% to 2,256p, Ocado (OCDO), down 1.7% to 1,153.5p and Sainsbury’s (SBRY), down 1.3% to 185.5p.
Yesterday’s few risers included McBride (MCB), up 2.3% to 63.4p, Hotel Chocolat (HOTC), up 1.5% to 372.5p, Premier Foods (PFD), up 1.4% to 32.4p and Unilever (ULVR), up 1.2% to 4,967p.
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