Carlsberg hit by rising input costs in 2011

City A.M. Reporter
Carlsberg, the world’s fourth-largest brewer, yesterday reported a 26 per cent rise in third-quarter operating profit, but lost market share in Russia and warned of rising input costs in 2011.

The maker of Carlsberg, San Miguel, and Kronenbourg raised its 2010 view on key market Russia, where it is market leader, to a mid-single digit percentage decline from its expectation in August of a high single-digit drop.

It also nudged up its profit outlook after a hot summer and rising consumer sentiment in eastern Europe provided a boost.

Chief executive Jorgen Buhl Rasmussen said that while the firm sees signs of recovery in eastern Europe, conditions remain challenging in several northern and western European markets.

“Rising input costs will have an impact and we will therefore have to increase sales prices,” he said.

Prices on malt, wheat and barley have surprised, mainly in eastern Europe, Rasmussen told Reuters. “The fires and the drought in eastern Europe have clearly had an effect in the autumn, more than we had thought in July and August.”

ING analyst Gerard Rijk said Carlsberg’s eastern Europe unit, which includes Russia, disappointed compared with rivals, as did its message on input costs and the need to raise prices. Carlsberg’s share price has quadrupled in the past two years – soaring around 60 per cent this year and outpacing larger rivals – but is still below a 2007 record. Carlsberg gets more than half its revenue in western Europe. But as those markets are saturated, it sees mid-term growth in Russia – despite a tripling of beer tax in January to combat alcoholism – and longer term in Asia.