Carlsberg Posts Increased Profit Due to Restructuring

Denmark based Carlsberg A/S posted a 25% increase in net profit for the half year with a recent sale and the swap of beer assets that is part o a restructuring plan that offset a drop in volumes of beer and overall revenue.

The brewer over the past few quarters has been hit by lackluster earnings amidst heavy pressure from declining markets in Eastern Europe and a weakened ruble.

Carlsberg officials added that beer markets across the region are continuing to be hurt by a difficult macro environment especially in Russia and the Ukraine.

Volumes remained flat, but the beer market in Russia fell 2% and the market in Ukraine was down a whopping 6%, said Carlsberg in a prepared statement.

The ruble in Russia remains the largest single currency exposure for Carlsberg and although dependency on Russia declined, the country still represented over 16% of its operating profit.

The company is expecting a translation impact that is negative of close to 600 million Danish kroner equal to approximately $91 million for 2016, which is up from an estimate originally of 550 million kroner.

Earlier in the year, Carlsberg explained its plan of seven years to position itself for more growth by transforming its business in Russia, focusing on its premium brands in large cities and expanding both portfolios of nonalcoholic and craft beer, while keeping the core of its business as beer.

The plan has progressed and Carlsberg announced it was developing action plans to be started during 2017.

Net profit for the first half year reached 1.87 billion kroner compared to 1.5 billion kroner during the same three months in 2015.

Sales fell to just over 31.23 billion kroner compared to 32.3 billion kroner for the same period last year, which reflected the lower volume of beer and the effect of a weaker Chinese, British, Eastern Europe and Norwegian currencies.

Analysts who were polled expected a net profit of over 1.38 billion kroner with sales reaching 31.55 billion kroner.

In its effort to be more efficient, Carlsberg said it would be merging all existing initiatives for profit improvement into one new program, which is going to generate net benefits that total between 1.5 billion and 2 billion kroner before the start of 2018.

Fifty percent of those benefits will then be reinvested and the other 50% will go toward the improvement of its earnings.

On Wednesday, the company announced that it is expecting to post organic growth in operating profit in the low single digits during 2016, despite higher spending on the new strategy for the second half of the year.

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