Danish brewer Carlsberg’s latest results offered “something for the bulls and something for the bears” according to city firm UBS.
The maker of Carlsberg, Tuborg and Baltika, which reported its results for the half year to June 30 this week, had seen both upward (bull) and downward (bear) trends.
It “gave the bulls some ammunition” with improvements in Russian market share and share gains in Northern and Western Europe.
The “bears” meanwhile were significant Q2 margin miss in Northern Western and Eastern Europe, investment firm UBS said in a note.
The brewing giant blamed bad weather as it reported a 5% drop in volumes in Northern and Western Europe in the second quarter, and by 3%-4% for the first half of the year.
It said UK volumes were flat despite the Diamond Jubilee and EURO 2012, but that it had still outperformed the market which declined by 3%.
However, Carlsberg said it was maintaining its full-year profit targets, as a stronger currency in Russia—its largest single market—cancels out the impact of issues in Western Europe.
And the company reported that it had continued to enjoy a boom in sales in emerging markets in the first half of the year. In the second quarter it made 12% of its revenue in Asia compared with 9.0% a year earlier.
Markets performing particularly strongly included India, Cambodia, Vietnam, and Laos.
It said that the Carlsberg Group continues to see appealing long-term growth opportunities in the Chinese beer market, following the announcement in Q2 of the construction of a greenfield brewery in Yunnan province.
One analyst told Beverage Daily that he viewed Carlsberg stock with caution as such a large proportion of its business was in Russia: “Carlsberg is strong in Asia, but that is still a smallish part of the business. With Carlsberg you have to take a view on Russia. You have low visibility of what is happening in Russia and anything negative could send the whole business pear-shaped.”
The company faces the threat of stricter alcohol regulation in Russia, including a potential ban on plastic bottles.
Maintaining a hold recommendation following the half year results, Societe Generale said in a note that Carlsberg’s main downside risk is further regulation in the beer market. Its main upside risk is a sharp fall in input costs which would result in significantly higher margin, notably in Russia.
Carlsberg’s second quarter profit before interest, tax and some one-time items fell 6.1% to 3.47 billion kroner (€455m), the Copenhagen-based brewing company said.
Carlsberg will publish its Q3 results on 7 November.