COPENHAGEN (Reuters) - Danish brewer Carlsberg cut its full-year outlook when reporting a 13 percent fall in quarterly profit that missed forecasts after sales in its key Russian market were hit by higher prices, sending its shares diving.
"Second-quarter performance in Russia has been below expectations," chief executive Jorgen Buhl Rasmussen said on Wednesday.
The world's fourth-largest brewer said it now saw full-year adjusted net profit growth of 5-10 percent, against previous guidance for more than 20 percent.
Carlsberg also cut its outlook for 2011 beer volume growth in Russia, which accounts for about 40 percent of group sales.
Second-quarter operating profit fell 13 percent to 3.70 billion Danish crowns ($715 million), compared with a forecast for 4.34 billion in a Reuters poll.
Sales rose 4.3 percent to 18.74 billion crowns, in line with an 18.73 billion forecast.
"The recovery in the beer category is taking longer than we anticipated as the Russian consumer adapts to the exceptional price increases of around 30 percent undertaken during the last 18 months," Rasmussen said, adding that had a negative impact on Russian profit and was the driver behind its downgraded outlook.
"I would not have thought that Carlsberg would have to downgrade its outlook due to this," Alm. Brand analyst Stig Nymann said, adding he had expected it would have been easier to get price increases through in eastern Europe.
"Perhaps we are now heading toward more difficult times for the Russian economy and Carlsberg ought to be careful not to tighten the price screw too hard from now on," Sydbank analyst Morten Imsgard said.
Rising raw materials prices have been challenging the world's brewers, who have looked to compensate by passing higher costs on to drinkers. The price of barley, a basic ingredient for brewing beer, has risen more than a third this year.
Fires and drought in eastern Europe last year have helped push up the price of malt barley. Unfavorable weather during the second quarter also hit beer consumption, the brewer said.
Carlsberg shares were down 18 percent to an 18-month low at 368.90 crowns by 6:45 a.m. EDT as investors remained worried about Russia, which is trying to reduce alcohol consumption.
"The market is nervous about how Russia will look in the coming years," said Nykredit analyst Ricky Rasmussen.
Carlsberg said it saw Russian beer volumes growing by a low single-digit percentage figure against a previous forecast of 2-4 percent. The Russian market declined about 2 percent in the second quarter, it said.
It stuck to a mid-term view of 3-5 percent beer volume growth in spite of Russia's crackdown on the sale of beer.
Russia is to impose a ban on all beer sales at outdoor kiosks, public transport stations, airports and petrol stations, which account for around a third of national sales, and the measures are to take full effect from 2013.
Russian consumers switching from spirits to drinks with lower alcohol contents would ensure that Carlsberg could meet its mid-term growth, the chief executive said.
"If we all agree on the historic trend that lower alcoholic beverages take a higher share, then by definition, beer should come up in consumption," said Buhl Rasmussen.
"I am confident that our Russian business will return to growth," Rasmussen said, adding he was pleased with the performance elsewhere -- markets in northern and western Europe grew slightly, while in Asia most beer markets reflected growth of mid- to high single-digit percentages.
For the Copenhagen-based brewer of Tuborg, Baltika and Carlsberg beers, northern and western Europe account for about 40 percent of total beer sales and Asia about 20 percent.
"It looks good for the business in northern and western Europe, and in Asia which is seeing strong growth in China," Imsgard said.
($1 = 5.174 Danish crowns)
(Additional reporting by Teis Jensen; Editing by David Cowell and Dan Lalor)
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.