Carlsberg A/S share price down, swings to first-quarter net loss as Russian market declines

Carlsberg A/S, the worlds fourth-largest brewer, reported a weaker-than-expected first-quarter and lowered its 2014 profit projections, as well as demand outlook in its biggest market.

Carlsberg swung to first-quarter net loss and trimmed its 2014 profit target as growing macro uncertainty in Russia, which accounts for 40% of the companys sales, and a weaker rouble hit earnings.

The Danish brewer reported a first-quarter net loss of 67 million Danish kroner ($12.5 million), compared to a profit of 62 million kroner ($11.57 million) during the comparable period last year and analysts expectations for a net profit of 251 million kroner ($46.83 million)

Operating profit before special items declined to 453 million kroner ($84.56 million), down from 680 million ($126.86 million) a year earlier and trailing forecasts to reach 749 million kroner ($139.74 million), according to a Reuters survey of analysts.

Sales slid by 2.9% to 12.9 billion kroner ($2.41 billion) from 13.28 billion kroner ($2.48 billion) a year earlier, trailing expectations for 13.32 billion kroner ($2.485 billion). Sales in Asia grew by 21%, much weaker than expected, while posting a 2% growth in Western Europe, which was slightly weaker than anticipated.

The companys results were largely impacted by the continuing decline of the Russian beer market, which is expected to shrink faster than expected. Carlsberg said it contracted by 5% in the first quarter after falling by 8% in 2013 when a law prohibited selling beer at kiosks. A weak Russian rouble, growing tension between Russia and Ukraine, and slowing economic growth also cast a shadow on the companys performance.

The brewer expects its biggest market to shrink by mid single-digit percentages in beer volume in 2014, compared to earlier projections for a low single-digit contraction. It also trimmed its guidance for reported operating and net profit this year, projecting low single-digit growth compared to Februarys forecasts for mid single-digit figures.

The Ukrainian market declined by a mid single-digit percentage as well, but despite the political turbulence, the companys businesses in the country were largely uninterrupted, Carlsberg said.

Carlsberg A/S fell by 0.84% to 530.00 Danish kroner by 08:24 GMT in Copenhagen, marking a one-year change of -4.76%. The brewer is valued at DKK 82.40 billion. According to the Financial Times, the 27 analysts offering 12 month price targets for Carlsberg A/S have a median target of DKK 600.00, with a high estimate of DKK 845.00 and a low estimate of DKk 460.00. The median estimate represents a 12.25% increase from the previous close of 534.50 kroner.