August 15, 2019 / 5:23 AM / 6 days ago

Premium brews in Asia stoke Carlsberg's half-year sales

(Reuters) - Danish brewer Carlsberg (CARLb.CO) posted a solid rise in half-year sales thanks to Asian markets, where consumers are trading up from mainstream beers to pricier premium brands, lifting its shares 5 percent on Thursday.

Asia, the brewer’s fastest-growing region, saw organic net revenue growth of 15%, lifted by 8.5% volume growth and increased sales of premium brands, despite a slight decline in China and a 3 percent volume slide in Russia, its top markets.

“That’s very good for us because we have Carlsberg, Tuborg and 1664 Blanc in our portfolio, and these grow very fast for us,” Chief Executive Officer Cees ‘t Hart told Reuters.

Just last week, Carlsberg raised its expectations for organic operating profit to “high-single-digit” from “mid-single-digit” percentage growth and said it had achieved a strong operating margin improvement.

According to brokerage Jefferies, the strong first half of this year “could argue for a further upgrade later in the year.”

Carlsberg has shifted its focus from cost-cutting to revenue growth, especially by selling more of its pricier brands.

The brewer reported an overall 3% increase in price/mix, which indicates whether the company sold more of its expensive brews.

“Asia continues strongly as expected. It looks good over there both on volume and price mix and their craft and speciality beer,” Jyske Markets analyst Henrik Hallengreen Laustsen told Reuters.

Carlsberg hopes to increase its 17% stake in major Vietnamese brewery Habeco, in which the Vietnamese government has a majority stake, but negotiations are dragging on.

“We are in continuous talks, progress is slow, but steady,” Hart told Reuters. “It is one of the opportunities to use some of our cash,” he added.

The brewer saw declining sales in Russia, its second-largest market, due to tough competition and price hikes at the beginning of the year leading to a loss of market share.

Carlsberg acquired Russia’s top beer maker, Baltika, in 2008 but has since issued a string of profit warnings due to toughening regulation of beer - which was only officially classified as an alcoholic drink in 2011.

FILE PHOTO: Carlsberg beer cans are seen at a pub in Mumbai, India, October 20, 2018. REUTERS/Danish Siddiqui

Overall, Carlsberg almost halved its net debt-to-EBITDA ratio to a reported 1.33 on Thursday from 2.62 in 2014, but Hart said the target was between 1.5 and 1.6.

Sales in the first six months of the year rose 6.5% to 32.99 billion Danish crowns (4.1 billion pounds) and operating margin came in at 16%, an improvement of 160 basis points.

Shares in Carlsberg were up 3.9% at 987.4 crowns at 1242 GMT, off a session high of 1,006 crowns. 1

Reporting by Nikolaj Skydsgaard; editing by Shounak Dasgupta, David Holmes and Georgina Prodhan

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