Carlsberg Profit Climbs as Restructuring Offsets Beer Drop

Denmark's Carlsberg A/S turned in a 25% jump in half-year net profit, with the recent sale and swap of beer assets as part of a corporate restructuring offsetting a decline in beer volumes and revenue.

The brewer has been plagued by lackluster earnings amid pressure from declining Eastern European markets and a weak ruble, and it said beer markets in the region continue to be hit by the challenging macro environment, especially in Ukraine and Russia. Volumes were flat but the Russian beer market fell by 2% and the Ukrainian market declined 6%, it said Wednesday.

The Russian ruble remains Carlsberg's biggest single currency exposure, and although its dependency on Russia has declined—the country represented 16% of operating profit before not allocated costs in the first half—the company expects a negative translation impact of around 600 million Danish kroner ($91 million) in 2016, up from a previous estimate of 550 million kroner, it said.

Earlier this year the company laid out a seven-year plan to position itself for growth by transforming its Russian business, focusing on premium brands in big cities and expanding both its nonalcoholic and craft beer portfolios while keeping beer at the core of its business. This plan is progressing and Carlsberg said it is currently developing action plans for 2017.

First-half net profit climbed to 1.87 billion kroner from 1.50 billion kroner in the same period last year. Sales slipped to 31.24 billion kroner from 32.4 billion kroner, reflecting lower beer volumes and the effect of weaker Eastern European, Chinese, British and Norwegian currencies.

Analysts polled by FactSet had expected net profit of 1.38 billion kroner on sales of 31.56 billion kroner.

In an effort to become more efficient, the company has said it would merge all its existing profit improvement initiatives into a new single program, which will generate total net benefits of 1.5 billion kroner to 2 billion kroner by 2018. Half of the benefits will be reinvested while the other half will go toward improving earnings.

The company said Wednesday it still expects to post low-single-digit percentage organic operating profit growth in 2016, despite likely higher spending on its strategy in the second half.

Total beverage volumes declined by 1% organically, with slack demand in the U.K., Finland, Poland and China. Beer volumes weakened, falling 2% organically.

The company booked a one-off profit of 406 million kroner in the quarter from the sale of Danish Malting Group and an asset swap related to Xinjiang Wusu Group, China. The brewer also took impairment and restructuring charges for its operations in the U.K., China and India.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

August 17, 2016 04:35 ET (08:35 GMT)

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