Carlsberg warns 2023 will be ‘another challenging year’

By Rachel Arthur

- Last updated on GMT


Related tags Carlsberg Russia Ukraine Beer Inflation

Carlsberg has reported ‘strong results in a challenging environment’ for FY2022: adding that higher prices and inflation could have an impact on beer consumption in 2023.

The Danish beer giant saw organic volume growth of 5.7% in 2022, with Asia as a particularly strong point (up 10.3%). However, the business has been particularly affected by the war in Ukraine and the decision to divest its sizable Russian business, announced in March, which it calls a ‘difficult but unavoidable decision’.

However, when excluding Russia, the group’s results were ‘well-ahead’ of pre-pandemic 2019 levels: with volumes up 9%, revenue up 20% and operating profit up 22%: with the recovery of the on-trade driving revenue per hectoliter growth of 9%.

Beer is a resilient category, but...

Looking forward to 2023, the company notes a wide guidance range (organic operating profit development of -5% to +5%) due to a number of uncertainties: including the war in Ukraine and fears over the impact of inflation on the beer category.

Carlsberg reports organic volume growth of 5.7% in 2022, with Asia as a particularly strong point (up 10.3%).

Premium international brands saw volume growth: Carlsberg 14%, Tuborg 9%, Grimbergen 11%, Somersby 1%.

Revenue growth of 15.6%, reaching DKK 70.3bn.

Organic operating profit grew 12.2%, thanks to on-trade recovery in Western Europe & strong performance in Asia: although this was partly offset by higher commodity prices & energy costs. A reported net profit of DKK -1,063 was impacted by write-downs of DKK 10,735m (mainly due to Russia).

Unsurprisingly, the company warns that increases in prices will affect the business in 2023.

“2023 will be another challenging year," it says. "Due to our and our suppliers’ rolling hedging, last year’s commodity and energy price increases will have a significant impact on our 2023 cost of sales and logistics costs.

"We intend to offset the higher costs in absolute terms through pricing, mix and continued tight focus on costs.”

However, it also casts doubt over how well the beer industry will fair against this backdrop.

“While beer historically has been a resilient consumer category, the higher prices in combination with generally high inflation may have a negative impact on beer consumption in some of our markets, particularly in Europe."

Divestment of Russian business

In Russia – where the company had previously enjoyed a #2 market position - the company expects to sign a divestment agreement by the middle of 2023.

“On 28 March, we announced our decision to seek a full divestment of our Russian business following Russia’s invasion of Ukraine," reports Carlsberg.

"The separation of the Russian business from the rest of the Group is complicated. The Russian operations have been an integrated part of our company, and the separation process has involved more than 150 workstreams across business functions. This has extended the divestment process compared with an immediate sale involving transitional service arrangements.”

A screening process is currently under way to evaluate bidders.

“We will take the necessary time to execute the separation and divestment to seek the best possible solution for all stakeholders, in particular our more than 8,000 employees and our shareholders. An offer process is expected to commence in Q1 2023, and we are aiming to sign a divestment agreement by mid-2023.”

Ukraine market impact

While production at Carlsberg’s three Ukrainian breweries was suspended in February, this was restarted during Q2.

“2022 was a terrible year for our Ukrainian employees and a highly challenging year for our business in the country," notes the brewer.

"The safety, health and wellbeing of our employees will always come first. Therefore, following Russia’s invasion of Ukraine, we suspended production at our three breweries and stopped operations in the country in late February and early March.

"Our Ukrainian colleagues have shown incredible strength and resilience, delivering an outstanding result while navigating both the humanitarian crisis and the enormous business challenges since the outbreak of the war. At their recommendation, we restarted production during Q2.”

Against a market decline of around 25% in the country, Carlsberg volumes declined by 20%.

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