Carlsberg raises profit outlook on higher beer prices

Carlsberg posted a first-half operating profit growth of 5.2% which was well ahead of analyst consensus estimates of 0.5% growth.

Carlsberg increased its annual profit forecast again after a solid first half where the Danish brewer raised beer prices to offset rising costs.

The maker of Tuborg and its namesake beer now expects annual operating profit growth of 4% to 7%. That compares to previous guidance of minus 2% to 5% growth and analyst consensus estimates of 5.8%.

The Danish brewer’s shares gained almost 3% at one stage, following the earnings statement.  It’s the second time since April that Carlsberg has upgraded its profit outlook on continued price increases.

Big brewers have been working hard to keep consumers drinking their premium suds after implementing the biggest price hikes in decades to offset higher input costs for everything from grains to freight and aluminum.

Carlsberg’s bigger rival Heineken cut its profit forecast this month after drinkers switched to cheaper beer in some markets. Anheuser-Busch profit growth managed to beat analysts’ expectations as strong growth in Latin America offset a marketing fiasco in the US that led to a slump in Bud Light sales.

Carlsberg posted a first-half operating profit growth of 5.2% which was well ahead of analyst consensus estimates of 0.5% growth, RBC analyst James Edwardes Jones said in a research report.

Organic revenue rose by double digits which was better than expected and driven mostly by price increases. Volume grew by less than 1% during the period, just below forecasts of 1.2%.

“Overall it is positive to see the guidance upgrade, but it should not be too surprising since the previous guidance was most likely too conservative,” Mads Rosendal, a credit analyst at Danske Bank, said in a note.

Next month, Jacob Aarup-Andersen, a turnaround expert who revamped facility management company ISS, will take over the running of Carlsberg, replacing Cees ‘t Hart who held the role for about eight years.

Carlsberg’s upgrade follows a pattern of over-delivery that the market has become accustomed to, said Edward Mundy, an analyst at Jefferies. 

He added that with an easier prior-year comparison to beat in the second half and a new chief executive starting in September “there could be an element of conservatism in the updated guidance”.

Carlsberg also said it will start a 1 billion-krone ($146 million) share buyback programme. 

Last month, rival Heineken cut its earnings forecast on weakening consumption following double-digit price increases. Operating profit slumped 22% on an adjusted basis in the first half, the Amsterdam-based brewer had reported. Beer volume dropped more than expected as Heineken boosted pricing by almost 13%.

The Dutch brewer forecast cost inflation to ease next year, which will reduce pressure to raise prices. Previously the guidance was for mid- to high-single digit earnings growth.

Vietnam and Nigeria accounted for more than half of the drop in first-half consumption, and demand in the Americas was soft, Heineken said. The Dutch company is the largest premium brewer in Vietnam, where it has been active for three decades, selling brands such as Tiger. 

Bloomberg