Carlsberg‘s fourth-quarter sales may have missed expectations, as the Danish drinks giant comes to grips with difficult market conditions in Eastern Europe, however its chief executive remains confident on the company’s overall results and future.
“At the end of quarter four, Russia was a bit weak – that has a cause (with there being) a ban on big bottles,” Carlsberg CEO’s Cees ‘t Hart told CNBC Wednesday, adding that with the ban starting on January 1, 2017, the brewer had to prepare for the changes during the second half of 2016.
“So what you see is in quarter three is strong sales and in quarter four, low sales in anticipation of and being prepared for that ban, and that has caused some lower sales in Russia but for the rest we are satisfied about 2016. It was a good year for Carlsberg.”
In June 2016, Russian lawmakers passed a law that would limit the size of plastic beer bottles to 1.5 liters or less, as part of the government’s effort to curb alcohol abuse. The law came into force for industrial production at the beginning of 2017, while for retail sales it’s expected to come into effect on July 1, 2017, Reuters reported.
Overall for Carlsberg, the Russian beer market showed a decline of 1 percent to 2 percent for 2016 overall, with a greater drop of 4 percent coming in for the fourth quarter.
The drinks giant did note that while warm weather boosted market development in the second half of 2016, and Russian shipments rose 1 percent for 2016, the overall challenging macroeconomic environment in Eastern Europe impacted the company during 2016.
Net revenue for Eastern Europe came in at 2.33 billion Danish crowns ($335 million) for the fourth quarter.
“The (Russian) market went down significantly over a couple of years – so three, four years ago the decline was double-digit, a year ago it was single digit and in 2016 it was more or less flattish.”
“So in that respect you could argue that the market is bottoming out. We think that and estimate that the impact on the ban will be a minus five percent on volume in 2017.”
While the state of Russia’s economy has proved challenging in recent years, given the low oil price, sanctions, and changes in the beverages and advertising space; other issues around the world provide uncertainties for businesses going forward, including what a Trump presidency and Brexit will mean for issues such as trade.
When asked about how the political environment was impacting the company, Carlsberg’s CEO said the company wasn’t going to reflect upon the geopolitical issues but recognized that these events were happening.
“At the end of the day for a company like ours, the consumer confidence is the most important and we see that has not changed over the last 12 months – it’s relatively low still in Russia and in that respect we are waiting to read the market in 2017.”
When looking at the overall figures, the drinks giant delivered a 2016 net profit of 4.49 billion Danish crowns, coming in slightly above analyst estimates. Looking ahead, the brewer expects organic operating profit to deliver mid-single digit growth during 2017.
However, the stock sat near the bottom of the STOXX 600, off more than 3 percent at 1.00 p.m. London time, after fourth-quarter sales missed analysts’ estimates in each of Carlsberg’s three key regions.
—Reuters contributed to this report.