Skip to main content

Carlsberg Breweries A/S (CGBWF.PK)

Q2 2010 Earnings Call Transcript

August 17, 2010 10:00 am ET


Jørgen Buhl Rasmussen


Jørn P. Jensen

– Deputy CEO and CFO

Anton Artemiev – SVP, Eastern Europe


Søren Samsøe – Danske Markets

Trevor Stirling – Sanford C. Bernstein

Michael Steib – Morgan Stanley

Paul Hofman – Credit Agricole Cheuvreux

Frans Høyer – ABG

Ian Shackleton – Nomura

Scroll to Continue

TheStreet Recommends

Melissa Earlam – UBS

Gerard Rijk – ING

Chris Pitcher – Redburn Partners

Graeme Eadie – UniCredit

Clementine Fletcher – Bloomberg News



» Staples CEO Discusses Q2 2010 - Earnings Call Transcript
» G&K Services CEO Discusses F4Q2010 Results - Earnings Call Transcript
» Brocade Communications CEO Discusses F3Q10 Results - Earnings Call Transcript

Welcome to the Carlsberg conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to your host, CEO Jørgen Buhl Rasmussen. You may now begin.

Jørgen Buhl Rasmussen

Thank you, and good morning to everybody. And welcome to the conference call for our six months results 2010. As was mentioned, my name is Jørgen Buhl Rasmussen. And I have with me today our CFO, Jørn P. Jensen; and also, our Senior Vice President, Anton Artemiev, for Eastern Europe; and also, Vice President of Investor Relations, Peter Kondrup.

The group's performance for the first six months was strong. Improvement in overall market share and a significant improvement in profits are the two key headlines. Going into 2010 following a challenging 2009 macroeconomic environment, we were clear in our ambitions to strengthen our market positions in the group for this year and in the coming years.

Therefore, we have increased our expense behind brands and activities, a high number of new products were launched, and successfully executed campaigns and events drove the improved market shares in a significant part of our business. At the same time, we relentlessly continue our focus on efficiency agenda as we still see a vast number of opportunities to improve the profitability of the group. After the very strong margin improvement for the first six months, we believe that the group is clearly on track to meet our medium term margin targets.

I'll now give you a summary of the group performance for the first six months, and then briefly go to the regions. And then as always, Jørn will then after walk you through the numbers and comment on our upgraded 2010 outlook. And thereafter, we will be happy to take your questions.

Please go to slide three. Going into 2010, we had clear ambitions of improving market shares in both volume and value. And after the first half of the year, we are on track. In Northern and Western Europe, our overall market share has started to improve after flat market share development in recent years. An important objective has been and will remain to grow share in both value and volume terms in the region.

We saw strong market share performance in Eastern Europe. There were particularly strong gains in Ukraine, continuing the very positive trends. Our market share in Russia improved sequentially during the first six months to 40.1% in Q2. And in Asia, we have once again obtained strong gains in market share across the region. And our business in Indo-China was particularly strong.

One of the drivers of the market share improvement was the successful activation of the Carlsberg brand across many markets in connection with the World Cup. And volumes of the Carlsberg brand increased globally by 8%. The performance in all regions is also a result of the acceleration of new product introductions, line extensions, and events and promotions successfully executed. We increased investments behind our brands and activities. And we increased spend behind innovations as well. That's been and will continue to be an important driver. Our brand marketing spend has increased by double-digit percentages. Nevertheless, our total operating expenses are still declining as efficiency improvements more than offset the higher marketing expense.

And now to slide four, the financial performance for the group was strong for the first six months as margins and net results improved substantially. Operating margin improved strongly by 210 basis points to 17.2%. In Q2, the improvement was even stronger with 290 basis points improvement to 23.6%. And we did see operating margin improvement in all regions.

Organic operating profit growth was 4%. And adjusted for the estimated de-stocking effect, it would have been approximately 9%. Group beer volumes declined organically by 3% for the first six months. For Q2, organic volume development was flat as Asia continued to grow strongly and Eastern Europe improved during the half year following the substantial impact from Russian de-stocking in Q1. Adjusting the estimated impact from the de-stocking, organic volume development would have been minus 1% for the six months. And price mix was flat with small positive pricing in most markets. Mix was slightly negative, but mainly due to a changed country mix.

Organic net revenue development was minus 4%, and minus 3% in Q2. Revenue was negatively impacted by portfolio optimization or delisting within non-beer products, where we have some low profitability products in a couple of Northern and Western European markets, and also a one-off impact from strikes in Denmark and Finland. Therefore, the total beverage volume declined organically more than beer volume. Net results growth was high at 80% due to growth in recorded operating profits and lower financial expense.

Finally, we are upgrading our earnings outlook for the year for both operating profit and net results. And Jørn will get back to this later. But we all believe the group delivered very strong performance for the first six months, with market share gains in the last part of the business combined with a strong profit improvement. This is completely in line with our plans to accelerate spend behind market share growth while continuing our efficiency agenda.

Read the rest of this transcript for free on