Carlsberg Says Coronavirus to Curb Beer Sales

(Bloomberg) --

Carlsberg A/S forecast slower earnings growth as the coronavirus outbreak threatens to crimp beer consumption in Asia.

The Danish brewer extended the shutdown of some breweries in China, where the authorities lengthened the Lunar New Year holiday in an effort to contain the outbreak. The virus has killed at least 425 people.

“It’s a very sad situation for China and its people, and the virus will affect our business negatively,” Chief Executive Officer Cees ‘t Hart said on a call with reporters. Late-night entertainment venues and about half of dining establishments are closed in the cities where the company has a presence, he said.

Carlsberg Says Coronavirus to Curb Beer Sales

Carlsberg is the first major European brewer to report earnings, with its forecast setting a subdued tone for rivals Anheuser-Busch InBev NV and Heineken NV, which have prioritized Asia for growth in recent years. Carlsberg’s business in that region accounts for about one-quarter of overall sales and boosted earnings by 23% last year.

Operating profit should rise by a mid-single-digit percentage this year on an organic basis, the Danish brewer said Tuesday. That’s after earnings rose about 11% in each of the past two years, reaching the highest in at least a decade in 2019.

Carlsberg Says Coronavirus to Curb Beer Sales

The shares rose as much as 3.6% in Copenhagen. They’ve gained 33% over the past 12 months.

‘More Volatile’

The company expects revenue from China to be “impacted severely” in the first quarter, the CEO said in an interview. Carlsberg has asked its top 60 managers to deepen cost cuts so that it’s able to mitigate the effect on earnings, he said. Some advertising initiatives in the country will be temporarily put on hold, he said.

The maker of Tuborg tends to give a conservative forecast early in the year and has often adjusted the outlook upward later. In addition to the disease outbreak, competition remains tough in Russia, and a new drunken-driving law in Vietnam is also weighing on beer consumption.

The brewer raised its share buyback 11% to 5 billion kroner ($740 million) as earnings per share reached a record in 2019. Carlsberg also said currency shifts should boost earnings by about 50 million kroner this year, based on recent exchange rates.

The company has benefited from growing demand for its more expensive craft and low-alcohol brews such as Grimbergen and Carlsberg Nordic.

©2020 Bloomberg L.P.

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