Carlsberg Growth Prospects in Russia Dented by Beer Turmoil

(Bloomberg) -- A slowdown in Russian demand for beer as international sanctions threaten the country’s economy is weighing on Danish brewer Carlsberg A/S’s sales.

The Russian market shrank about 5 percent, hurt by restrictions on bottling, Carlsberg said Tuesday. Carlsberg’s volume in eastern Europe dropped 6 percent.

Asian sales were robust, however, which helped the company’s shares rise as much as 2.1 percent in early Copenhagen trading.

Carlsberg is the largest brewer in Russia, producing about a third of the beer in that market. Its business there has suffered in recent years amid retreating oil prices and political tensions, clouding Carlsberg’s ambition to boost revenue growth. Total first-quarter revenue fell 5 percent to 12.7 billion kroner ($2.1 billion), just short of estimates.

“For the equity story to push on, the company now needs to demonstrate improvement in top-line,” Jefferies analyst Ed Mundy wrote in a note to investors.

Organic sales growth was 2 percent in the quarter, meeting estimates. Volume rose 1 percent, ahead of analysts’ expectation of no change.

Chief Executive Officer Cees ’t Hart maintained the company’s forecast of mid-single-digit percentage organic growth in operating profit. He said he expects pricing and the mix of products to improve this year in Europe, speaking on a call with reporters.

Swift sales growth in China came as the Lunar New Year festivities in February took place later than usual this year, making for favorable annual comparisons. Carlsberg joins distillers Pernod Ricard SA, Remy Cointreau and Hennessy maker LVMH in reporting strong sales of alcoholic drinks in the country.

©2018 Bloomberg L.P.

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