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| Company announcement 2/2010 |
| 23 February 2010 |
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Financial statement as at 31 December 2009
Strong profit growth and significant cash flow in 2009
• Carlsberg delivered a strong 2009 operating profit of DKK 9.4bn (DKK 8.0bn in
2008). For the beverage activities organic operating profit growth was 28%.
Group operating profit margin improved to 15.8% (13.3% in 2008) and free cash
flow improved substantially to DKK 10.5bn. As a result of detailed planning and
strong execution the Group managed to mitigate the impact from the market
challenges and also improved market shares.
• The Group's beer volumes increased by 6% to 116.0m hl with an organic beer
volume decline of 4% (flat for Q4) and net acquisitions contributing 10%.
Throughout the year Asian volumes continued to grow at high single-digit growth
rates. Eastern Europe and Northern & Western Europe volumes declined organically
by mid-single-digit rates.
• Net revenue declined by 1% to DKK 59.4bn (DKK 59.9bn in 2008) with a flat
organic net revenue development. Excluding currency impact, total net revenue
would have increased by 6% in 2009. Value management initiatives and price
increases resulted in a positive price/mix effect of 4%. Q4 net revenue was DKK
13.6bn with organic net revenue growth of 3%.
• In 2009 Carlsberg improved market share in a significant part of the business.
The Group gained market shares in most markets in Eastern Europe and Asia, with
particularly strong gains in the Ukraine and Russia. The Group maintained
overall market share in Northern & Western Europe.
• New products were launched in all regions and Carlsberg will further intensify
its focus and resources on building a strong portfolio of new products and brand
innovations.
• Group operating profit increased to DKK 9,390m (DKK 7,978m in 2008) with 28%
organic growth for the beverage activities. For Q4, Group operating profit was
DKK 1,643m (DKK 1,386m in Q4 2008) with 32% organic growth in the beverage
activities. The Eastern European and Asian regions were the main drivers behind
the strong organic growth.
• Operating margin increased to 15.8% (13.3% in 2008). Q4 Group operating margin
was 12.1% (9.6% in Q4 2008).
• Net profit was DKK 3.6bn (DKK 2.6bn in 2008) and earnings per share were DKK
23.6 (DKK 22.1 in 2008). For 2009 Carlsberg proposes a dividend per share of DKK
3.5 (DKK 3.5 for 2008).
• Driven by the intense and structured focus on cash flow improvements
throughout the Group, free cash flow was exceptionally strong at DKK 10.5bn.
Higher profits, lower capital expenditures and a significant year over year
improvement in working capital were the main reasons behind this.
• In line with the intention of rapidly deleveraging the Group, net
interest-bearing debt was reduced substantially to DKK 35.7bn compared to DKK
44.2bn at the end of 2008. Net debt/EBITDA was 2.7x at the end of 2009.
• Of the DKK 1.3bn synergy target related to the S&N acquisition, around DKK
970m annualised savings have been achieved as at 31 December 2009. The remainder
of the synergy target will be achieved in line with the original plan.
• In a Russian market that declined by around 10% in 2009 Carlsberg improved its
market share from 38.8% to 40.6% (+180bp). Due to the 200% increase in excise
duties on 1 January 2010, Carlsberg expects the Russian beer market to show a
low double-digit decline in 2010 and anticipates that Carlsberg will continue to
outperform the market.
• For 2010 Carlsberg expects:
• Operating profit to be in line with that reported for 2009 (notwithstanding
the extra earnings in Q4 2009 generated by stockbuilding in Russia ahead of the
excise duty increase as set out below).
• Net profit growth of more than 20% based on the expected operating profit.
• Due to the Russian stockbuilding in Q4 2009 and subsequent destocking in Q1
2010, the Group's Q1 2010 and 2010 full-year operating profit will be negatively
affected by approximately DKK 300m. This is included in the 2010 expectations.
Furthermore, due to phasing of price increases linked to the excise duty
increase in Russia, earnings will be skewed more towards the second half of the
year.
• Carlsberg has set new medium-term (3-5 years) operating margin targets:
• Northern & Western Europe at 15-17% (previously 14-16%)
• Eastern Europe at 26-29% (previously 23-25%)
• Asia at 15-20% (new)
• Carlsberg Group at around 20% (new)
Commenting on the results, CEO Jørgen Buhl Rasmussen says: “We were well
prepared for 2009 as we identified earnings protection and cash flow improvement
as our top priorities going into the year. The 2009 result demonstrates that we
have been successful in our efforts to meet these goals. For 2010 profitable
market share growth through accelerated initiatives on brands and innovations
will be a top priority as well as continuing our focus on efficiency
improvements. While we expect consumer dynamics to be challenging in 2010, we
also see many opportunities to strengthen our position in key markets.”
Carlsberg will present the financial statements at a conference call for
analysts and investors today at 9.00 am CET (8.00 am GMT). The conference call
will refer to a slide deck, which will be available beforehand at
www.carlsberggroup.com.
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| Contacts: |
| Investor Relations: Peter Kondrup, +45 3327 1221 |
| Media Relations: Jens Peter Skaarup, +45 3327 1417 |
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KEY FIGURES AND FINANCIAL RATIOS
BUSINESS DEVELOPMENT
2009 was a challenging year for Carlsberg and the global brewing industry. The
global economy affected consumer behaviour negatively and overall beer market
volumes declined. While the Asian markets were less affected by the crisis, the
Northern & Western European and, in particular, the Eastern European markets
were materially impacted. Although consumers reduced their consumption, they
remained loyal to their favourite brands leading to a positive price/mix across
many markets. This occurred despite the negative channel mix from on-trade to
off-trade.
Carlsberg was well prepared entering 2009. In late 2008 and early 2009 the Group
implemented and accelerated numerous efficiency improvement initiatives to
protect earnings and improve cash flow and as a result was able to mitigate the
impact from the declining markets. Carlsberg delivered a strong operating profit
improvement, improved overall market shares and delivered a very substantial
free cash flow improvement.
Organic Group beer volumes declined by 4%. Including acquisitions beer volumes
increased by 6% to 116.0m hl (109.3m hl in 2008). In Q4 organic beer volumes
were flat. Although there were signs of improvements in some Northern & Western
European markets at the end of the year, underlying beer volumes continued to
decline in the region. In Eastern Europe, volumes grew slightly in Q4. This
growth was solely due to the Russian stockbuilding ahead of the excise duty
increase on 1 January 2010. The Asian business continued to grow. Pro rata Group
volumes of other beverages were 19.8m hl as in 2008.
Net revenue declined by 1% to DKK 59,382m (DKK 59,944m in 2008) driven by flat
organic growth (consisting of total volume -4% and price/mix +4%), currency
impact -7% and acquisition impact 6%. Organic net revenue growth was 3% in Q4.
The continued focus on portfolio and value management coupled with pricing and
strong sales execution were the key drivers behind the price/mix effect of 4%.
The positive mix in Northern & Western Europe and Asia was offset by the
negative mix in Eastern Europe resulting from a shift in channel and packaging
mix, and from Q3, also from a marginal shift between brands. The negative
currency effect was mainly driven by weaker Eastern European currencies.
In early 2009, Carlsberg integrated its global R&D, innovation, sales and
marketing activities into one organisation. The goal is to expand and focus the
innovation process driving key concepts across more markets more quickly so as
to accelerate revenue growth and gain volume and value shares in all regions. As
part of these efforts Carlsberg will evolve and develop brand positions and
portfolio structure. Several product launches took place in 2009, key events
being the relaunch of the 1664 and Kronenbourg brands in France and the kvass
Khlebny Krai launch in Russia. In China, Carlsberg Light was launched targeting
the restaurant sector, and Somersby Cider was rolled out across new markets in
Northern & Western Europe.
Higher input costs affected the Group negatively and cost of sales per hl
increased organically by approximately 2% for the year. While Carlsberg
benefited from lower raw material prices in Eastern Europe in 2009, the Group
was negatively affected by higher raw material prices in Northern & Western
Europe and Asia. Driven by increase in net revenue per hl, lower input costs in
Eastern Europe and production efficiencies across the Group, organic gross
profit growth per hl was 8% (8% in Q4). Organic gross profit margin improvement
per hl was around 130bp (approximately 180bp improvement in Q4).
The Group has maintained a focused marketing spend supporting our key brands and
activities. The share of voice in 2009 was on a level with 2008 despite lower
brand marketing costs. The lower brand marketing costs were primarily driven by
media deflation, lower media activity overall and EURO 2008 sponsorship
impacting 2008.
Group operating profit increased by 18% to DKK 9,390m (DKK 7,978m in 2008).
Organic operating profit growth was 21%, currency impact was ‑13% and
acquisitions contributed 10%. Operating profit for the beverage activities was
DKK 9,460m (DKK 7,604m in 2008) with organic growth of 28% (14% in DKK). Organic
operating profit growth accelerated in Q4 due to the Russian stockbuilding and
was 35% for the Group and 32% for the beverage activities in the quarter.
Strong organic profit growth was achieved despite the volume decline. This is
largely attributable to the Group's thorough planning for and execution during
the year. The efficiency improvements consisting of both long-term projects and
accelerated efficiency programmes were a key driver of the organic operating
profit growth. Also, value management initiatives driving net revenue per hl,
the synergies from the S&N acquisition and favourable raw material costs in
Eastern Europe all contributed positively. The efficiency improvements were
necessary due to the challenging market conditions and although some cost
reductions were linked to volume, it is Carlsberg's expectation that a
significant part of the cost base reduction is sustainable as it has
predominantly been driven by structural and process changes.
Eastern Europe generated organic operating profit growth of 38%, and the region
was a key contributor to the Group's strong performance. This growth was
achieved despite very challenging markets. Northern & Western Europe delivered
6% organic operating profit growth while the Asian business continued its strong
organic performance throughout the year with 19% organic operating profit
growth.
Net profit was DKK 3.6bn (DKK 2.6bn in 2008) and earnings per share were DKK
23.6 (DKK 22.1 in 2008).
Operating cash flow grew by 74% to DKK 13.6bn (DKK 7.8bn in 2008) and free cash
flow increased substantially to DKK 10.5bn. The intense focus throughout the
Group on improving cash flow was very successful, especially within working
capital management. Also, capital expenditures, cash charges for taxes and
interest costs were markedly reduced and profits improved.
Although capital expenditures have been reduced, the Group has continued to
invest in markets with capacity constraints and long-term growth opportunities.
In 2009 Carlsberg initiated construction of breweries in India and Vietnam.
A key focus area in 2009 has been debt reduction and as a result of the very
strong free cash flow, net interest-bearing debt was reduced to DKK 35.7bn as at
31 December 2009 compared to DKK 44.2bn at the end of 2008. Net debt/EBITDA
declined to 2.7x at 31 December 2009 compared to the Group's expectations of
“below 3x”.
Driven by Carlsberg's ambition to improve efficiency, several structural
initiatives were carried out in 2009. The Norwegian Arendal brewery was sold,
the Finnish Pori brewery was closed, the German Braunschweig brewery with its
fighter brand activities was divested, Carlsberg entered into a distribution
cooperation with the Nordmann Group in Germany and it was decided to close the
Leeds brewery in 2011. Carlsberg also signed two Memoranda of Understanding with
the aim of increasing its shareholdings in the Habeco and Hué breweries in
Vietnam.
In addition to these efforts a number of projects were continued and initiated
with the aim of improving governance, driving best practice, growing revenue and
ultimately improving efficiency. Major projects included: establishment of a
global procurement organisation, strengthened shared services, centralised IT
organisation, expansion of value management toolbox, establishment of on-trade
programmes based on consumer insights across regions, and a new integrated
people performance assessment and organisational succession-planning process.
In 2009, the Executive Committee was strengthened by the appointments of Khalil
Younes, Senior Vice President, Group Sales, Marketing & Innovation; Jesper
Friis, Senior Vice President, Western Europe; Jørn Tolstrup Rohde, Senior Vice
President, Northern Europe; and Roy Bagattini, Senior Vice President, Asia.
These appointments have further strengthened the leadership competences and
added further experience in global fast moving consumer goods to the Group.
2010 EARNINGS EXPECTATIONS
Driven by the Group's initiatives implemented in late 2008 and early 2009,
Carlsberg managed to exceed the profit, cash flow and financial leverage
expectations set out at the beginning of 2009.
Although there are positive signs in some markets, consumer dynamics will remain
challenging. Despite this, the Group sees opportunities to further strengthen
its market position in several key markets.
The Russian market will undoubtedly be negatively impacted by actual and phased
consumer price increases following the 200% excise duty increase on 1 January
2010. However, based on our strong business set-up in Russia and a carefully
planned pricing strategy, the Group believes this will bring opportunities to
further strengthen the market position.
For 2010 Carlsberg is assuming the following:
A slight decline in Northern & Western European markets
A low double-digit percentage decline in the Russian market
Continued market growth in Asia
Continued implementation of operational and capital efficiency improvements
Increased investments in brands and channel marketing to grow volume and value
market shares
For 2010 Carlsberg expects:
Operating profit to be in line with that reported for 2009 (notwithstanding the
extra earnings generated by stockbuilding in Q4 in Russia ahead of the excise
duty increase as set out below)
Net profit growth of more than 20%
Due to the Russian stockbuilding in Q4 2009 and subsequent destocking in Q1
2010, the Group's Q1 2010 and 2010 full-year operating profit will be negatively
affected by approximately DKK 300m. This is included in the 2010 expectations.
Furthermore, due to the chosen detailed strategy for phasing of price increases
in Russia to compensate for the significant increase in excise duties on 1
January 2010, earnings in Eastern Europe in general will be skewed towards the
second half of the year more than has been experienced in prior years.
Working capital improvement will continue to be a key focus area. However, the
focus is changing from "year over year" improvement to "day over day"
improvements. This is being done with the aim of achieving a higher reduction in
average working capital during the year.
MEDIUM-TERM FINANCIAL TARGETS
With an operating margin of 28.5%, the Eastern European region exceeded the
region's medium-term operating margin target of 23-25% in 2009. Margin targets
have been revised and the following medium-term (3-5 years) operating margin
targets have been set:
Northern & Western Europe at 15-17% (previously 14-16%)
Eastern Europe at 26-29% (previously 23-25%)
Asia at 15-20% (new)
Carlsberg Group at around 20% (new)
These ambitious margin targets will be met through a combination of intensified
focus on driving volume and value market shares, and a continuous drive for
efficiency improvements.
2009 REGIONAL REVIEW
NORTHERN & WESTERN EUROPE
The overall beer markets in Northern & Western Europe declined by some 5-6% in
2009. However, during the latter part of the year there were some signs of
improvement and the Q4 market decline was around 4%.
The impact from the economic crisis affected the individual markets very
differently with the Finnish, Swedish, Swiss and French markets showing growth
or flat development while the Baltic and Balkan markets declined by high single
digits.
Carlsberg maintained an overall flat market share in the region with organic
beer volumes declining by 5.6% (-3.7% for Q4). Reported beer volumes declined by
2% to 50.2m hl (51.0m hl in 2008).
Net revenue per hl increased 5% organically due to the Group's strong focus on
value management across all markets which mitigated some of the negative volume
impact. Organic net revenue development was ‑2% for the region (-2% for Q4). Net
revenue for beer declined by 2% (‑6% volumes, 4% price, flat mix, ‑4% currency
and 4% from acquisitions).
Higher raw material prices for the region in 2009 compared to 2008 and the
channel shift from on-trade to off-trade in several markets had a negative
impact on gross profit margin. Although the full-year gross profit margin
declined, the second half of the year showed an improvement as the positive
impact from the accelerated production efficiency improvements became visible in
the figures. In absolute terms, the higher input costs were more than offset by
the higher organic net revenue per hl for the year. Mix was positive or flat in
most Northern & Western European markets except the Baltics, Poland and South
East Europe.
For 2009 operating profit for Northern & Western Europe increased by 7% to DKK
4,237m (DKK 3,953m in 2008) with 6% organic operating profit growth. For Q4
organic operating profit growth was -21%. Adjusting for the income from brand
disposals in Q4 2008, organic operating profit growth would have been flat for
the quarter and approximately 10% for the year.
Operating margin was 11.6%, an increase of approximately 100bp. This was largely
driven by the accelerated efficiency improvements initiated in the second half
of 2008 and at the beginning of 2009. The impact from these efforts became
increasingly visible in the second half of the year. Most markets delivered
organic operating profit growth for the year.
France, the UK, Switzerland, the Balkans, and Greece
The French market was flat in 2009. As anticipated in the turnaround plan, the
total market share of Brasseries Kronenbourg declined for the year as many of
the consumer-facing activities started in the late spring. There was a
stabilising trend in the second half of 2009 following the relaunch of the
Kronenbourg and 1664 brands. According to Nielsen data for the off-trade there
was no market share erosion of these two brands in the second half of the year
despite the recent years of ongoing period-on-period market share decline.
Synergies from the S&N transaction are on track and coupled with accelerated
efficiency improvements, the new brand positioning and a changed pricing
structure, the French business delivered double-digit organic operating profit
growth. This is a very satisfactory result given that the turnaround plan is in
its first year of implementation.
Carlsberg UK performed particularly well in 2009. There was a 4% market decline
with a continued shift from on-trade to off-trade but Carlsberg gained both
volume and value share in the on-trade and off-trade channels and increased its
share of the total market by some 110bp to 14.4%. The positive trend accelerated
in the latter part of 2009 fuelled by the impact of the JD Wetherspoon contract,
strong off-trade execution and the inclusion of the super-premium San Miguel
brand in the Carlsberg portfolio. Profits improved as a result of volume growth,
value management efforts and efficiency initiatives.
In a flat Swiss market, Feldschlösschen continues to grow net revenue per hl and
profits through premiumisation, mix and efficiency improvements. In late 2009
Feldschlösschen Premium was launched to further increase the average value per
hl of the Feldschlösschen portfolio. The more female-oriented Eve continues to
be a strong value contributor and will be introduced in more markets.
Carlsberg's beer volumes in South East Europe declined by 12% as the economic
crisis affected consumer behaviour negatively. The Group kept margins unchanged
compared to 2008 due to strong cost and value management focus.
The integration of Greek Mythos progressed and profits improved strongly.
Denmark, Finland, Poland, Germany, and the Baltics
The Danish beer market declined by 8% (before adjusting for impact from border
trade), though with an improved trend in the second half of the year. Carlsberg
grew its beer market share by 60bp to 56.3%. Somersby Cider continued to grow
throughout the year and has effectively established the cider category in
Denmark. New entrants are coming into the category which will drive further
category expansion. Operating profit growth was satisfactory as a result of cost
reductions and positive value/mix development.
The Finnish beer market grew by approximately 1% in 2009. Sinebrychoff's growth
outstripped the market and the market share reached 50%. Despite negative
packaging and channel mix, profits improved due to volume growth and efficiency
improvements, including the closure of the Pori brewery.
Several structural initiatives took place in Germany during the year. The
Braunschweig brewery was sold, the Göttsche wholesaler was merged into a new
distribution cooperation with the Nordmann Group and a focused brand strategy
was established. Organic operating profit growth was achieved as a result of
efficiency improvements.
The Baltic States were very severely affected by the difficult macroeconomic
environment with subsequent volume decline and downtrading having a negative
impact on profits. Several structural changes were made to reduce the cost base.
Carlsberg's beer volumes declined by around 10% in 2009 although the Q4 volume
decline was modest. Nevertheless, the Baltic business still delivered
double-digit operating profit margins.
The Polish market, too, was challenging as a result of the economic recession.
The market declined by 8% and there was downtrading. Carlsberg maintained market
share. Despite several actions being implemented during the year, operating
profit declined.
EASTERN EUROPE
2009 was a challenging year in Eastern Europe as the economic recession had a
negative effect on beer consumption in the region. In this environment Carlsberg
managed to gain market share in all markets except Kazakhstan.
The Group's total beer volumes in Eastern Europe increased by 10% while organic
beer volumes declined by 6%. Due to the strong growth of the malt-based
non-alcoholic drink kvass, the volume of other beverages increased by 26%. In Q4
organic beer volumes increased by 2%, but the recovery in the quarter was driven
by stockbuilding in the Russian distribution chain ahead of the 200% excise duty
increase on 1 January 2010. The underlying consumption trends in Q4 were
unchanged.
Organic net revenue growth for the region was 1%. The positive price/mix
improvement of 6% for beer offset lower beer volumes. In Q4 organic net revenue
growth was 9% while reported net revenue declined by 11% due to devaluation in
currencies.
Organic gross profit margin improved strongly by approximately 525bp with higher
net revenue per hl accounting for approximately 70% of the increase. The lower
cost of goods sold due to synergies, efficiency improvements and lower input
costs accounted for the remaining 30%. Organic operating profit growth was 38%.
Including acquisitions operating profit was DKK 5,289m (DKK 4,108m in 2008). As
mentioned in the Company Announcement of 17 December 2009, the stockbuilding
effect in Russia affected operating profit positively by approximately DKK 300m.
Consequently, Q4 organic operating profit growth was unusually strong at 64%. In
2009, operating margin increased to 28.5% (21.5% in 2008) with contribution from
all markets.
The overall strong gross profit margin and operating margin improvements were
driven by price increases, favourable input costs, synergies, the accelerated
efficiency improvements and improved point-of-sales execution. All these
initiatives enabled Carlsberg to more than offset the negative profit impact
from lower volumes and negative operational leverage.
Russia
The Russian beer market development in 2009 was weaker than anticipated at the
beginning of the year, declining by an estimated 10% as the weak macroeconomic
environment affected consumer behaviour.
Carlsberg continued to strengthen its market share in Russia gaining 180bp and
achieving a 40.6% share compared to 38.8% in 2008 (Q4 market share was 39.3% vs.
39.2% in Q4 2008). As communicated in the past, it is important to look at
trends when assessing market share development since market share short term can
be influenced by many factors, such as timing of price increases vis-à-vis
competition, timing of innovations, promotions, etc. In 2009, Carlsberg
reinforced its market leadership in all segments and increased market shares in
each and every segment with the exception of lower mainstream where market share
was flat. Key drivers behind the strong volume and value market share
performance continue to be the superior brand portfolio and the strongest
route-to-market with an integrated production, logistics and distribution
set-up.
Carlsberg's Russian beer volumes (shipments) declined by 6%. Shipments in Q4
were up 1% which was substantially higher than consumer off-take as distributors
were stockbuilding ahead of the excise duty increase on 1 January 2010.
Carlsberg's "in-market sales" (off-take) declined by an estimated 8%. Inventory
levels are closely monitored and managed and the higher inventory levels at the
end of the year are expected to be reversed in Q1 2010.
There was a positive price effect of 9% and mix effect of -3%. The higher price
per hl was driven by price increases, improved portfolio management and sales
execution. The negative mix effect was primarily driven by a shift in packaging
mix within brands and a changed channel mix in the off-trade with consumers
moving from smaller outlets to discounters and supermarkets. There was also a
shift between brands in the second half of the year.
In this challenging market the Russian business delivered strong operating
margins throughout 2009 as a result of proactive management of costs and
efficiency improvements.
In December 2009 the President of the Russian Federation signed the amendments
to the Tax Code as a result of which Russian beer excise duty increased from RUB
3 to RUB 9 per litre in 2010. Due to price increases this will have a negative
impact on the market development in Russia in 2010 and Carlsberg expects a low
double-digit percentage decline. Carlsberg has been making detailed preparations
for the new excise duty regime and is well prepared for 2010. The focus for 2010
will be to continue to strengthen the Russian market position whilst balancing
volume and value development. This should be possible due to Carlsberg's
superior brand portfolio and strong operational and commercial set-up.
The Ukraine
The Ukrainian market declined by approximately 7% in 2009 whilst average beer
retail prices increased by almost 30% driven by the price increases following
the 94% increase in beer excise duties (implemented on 1 July 2009) and consumer
price inflation. Carlsberg's organic beer volume growth was 5% and our market
share increased significantly to 28.9% (25.5% in 2008). The Ukrainian business
now accounts for more than 15% of Carlsberg's Eastern European volumes.
Carlsberg is the clear number two in the market.
The market share gain was driven by a well-executed turnaround including
expanded distribution network, improved sales execution, product launches and a
more performance-driven governance system. In particular, the national launch of
the mainstream brand Lvivske, on top of the already established Slavutich brand,
has proved successful. Within the non-beer category, the kvass brand Taras grew
strongly during the year.
Organic revenue growth was almost 20% mainly driven by a 15% positive price/mix
effect. Driven by the volume growth, price/mix improvements and efficiency gains
the Ukrainian margins improved significantly in 2009.
Other markets
The volume development in the remaining Eastern European markets was mixed.
Carlsberg gained substantial market share in Uzbekistan where volumes grew
strongly in a market that declined by 12%. Beer volumes in Belarus were almost
flat in a declining market with Carlsberg gaining market share.
The beer market in Kazakhstan was under significant pressure and Carlsberg lost
market share on local brands. To strengthen and simplify the business model in
Kazakhstan, Carlsberg has integrated the significant Russian export business
with our local operation aiming to further strengthen our leading market share
position.
The Group delivered significant organic operating profit growth in all markets.
ASIA
Note: Full-year income and volumes from the associated company Chongqing Brewery
are included in Q4
The Asian markets were less affected by the economic crisis and the Group's beer
volumes continued to grow throughout the year. The Asian business delivered 8%
organic beer volume growth for the year (5% in Q4). The Asian beer volumes
increased by 26% including acquisitions and consolidation changes. The Asian
business now accounts for approximately 13% of Group beer volumes. As the Asian
markets continue this growth trend the region will become even more important
for Carlsberg in the future.
Organic net revenue growth was 14% (17% in Q4). The positive price/mix effect
prevailed in the majority of the Asian markets with a particularly strong
improvement in China.
Operating profit increased by 30% to DKK 666m (DKK 511m in 2008) with organic
growth of 19%. Q4 organic operating profit growth was 14%. Despite the negative
impact from higher input costs in 2009, all markets contributed to the strong
organic operating profit growth with the exception of India where establishment
and investment in our business is in the early stages.
In 2009 Carlsberg started construction of two greenfield breweries - one in
India and one in Vietnam.
Malaysia
The Malaysian market declined by approximately 2%. The early Chinese New Year in
2009 (January) and late Chinese New Year in 2010 (February) had a negative
impact on the market development as stockbuilding ahead of the Chinese New Year
took place in Q4 2008 for 2009 and Q1 2010 for 2010.
Carlsberg Malaysia gained 100bp market share reaching 44.1%. The business
delivered organic operating profit growth due to price/mix and efficiency
improvements.
In 2009 Carlsberg Malaysia acquired Carlsberg Singapore, creating a stronger and
more efficient entity on the Malaysian peninsula.
China
Carlsberg's Chinese beer volumes grew mid-single digit. The growth was driven by
local brands and the Carlsberg brand. The Carlsberg brand grew by more than 15%,
driven by Carlsberg Chill and the extension of the Carlsberg brand portfolio
with the addition of Carlsberg Light, launched in 2009 and targeting the Chinese
restaurant sector.
Carlsberg continued to gain market share both in Western China and in the
international premium segment.
Organic operating profit growth was more than 30% as a result of volume growth,
positive price/mix and efficiency improvements.
Indochina
The markets in Indochina (Vietnam, Laos and Cambodia) continued the strong
growth trend with high single-digit growth rates. In Vietnam and Cambodia
Carlsberg increased market shares substantially while the business in Laos grew
in line with the market. Hence, the Group's organic beer volume growth was 22%
for the year.
Carlsberg signed two Memoranda of Understanding in Vietnam to increase the
ownership in Habeco and Hué breweries. This will strengthen the Group's market
position and opportunities in northern and central Vietnam.
CENTRAL COSTS (NOT ALLOCATED)
Central costs were DKK 732m (DKK 968m in 2008). In Q4 central costs were DKK
271m (DKK 363m in 2008). Tight cost control in 2009 and the impact of EURO 2008
in 2008 were the main reasons behind the improvement.
Central costs are incurred for ongoing support of the Group's overall operations
and strategic development and driving efficiency programmes. In particular, they
include the costs of running the headquarters and central marketing (including
sponsorships).
OTHER ACTIVITIES
In addition to beverage activities, Carlsberg has interests in the sale of real
estate, primarily at its former brewery sites, and the operation of the
Carlsberg Research Center. Real estate gains were, as expected, insignificant in
2009, and overall these activities generated operating profit of DKK -70m (DKK
+374m in 2008).
Monetising the value of redundant assets which are no longer used in operations,
including the Copenhagen brewery site, remains an important opportunity to
provide additional capital to the Group and enhance return on invested capital.
As stated earlier the process of finding one or more partners for the Valby site
is ongoing, although it has been delayed due to the current investment climate.
Carlsberg will inform the market when a decision has been reached.
COMMENTS ON THE FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The 2009 Consolidated Financial Statements of the Carlsberg Group have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU and additional Danish disclosure requirements for annual
reports, cf. statutory order pursuant to the Danish Financial Statements Act.
In addition, the Consolidated Financial Statements have been prepared in
compliance with the International Financial Reporting Standards (IFRS) issued by
the IASB.
The purchase price allocation of the fair value of identified assets,
liabilities and contingent liabilities in the acquisition of part of the
activities in S&N was completed in April 2009 and for the acquisition of
Baku-Castel Brewery in August 2009. The comparative figures for 2008 have been
restated accordingly in accordance with IFRS 3 requirements.
INCOME STATEMENT
In 2009 the Group generated total net revenue of DKK 59,382m (DKK 59,944m in
2008), a slight decrease of 1% compared to 2008, reflecting flat organic
development, net acquisitions accounting for DKK 4,712m (+6%) and a negative
impact of DKK -4,652m (-7%) from exchange rate movements. Foreign exchange
movements were most notably caused by adverse currency impact developments in
the RUB, UAH and GBP.
The flat organic revenue was achieved despite an organic volume decline of 4%,
as this was offset by positive effects from pricing, including value management
efforts.
Beer sales represented DKK 46,148m of total revenue (DKK 45,503m in 2008),
equivalent to 78% of total revenue.
Gross profit was DKK 29,185m (DKK 28,695m in 2008), with organic growth being
DKK 903m (+3%), net acquired activities representing DKK 1,889m and a negative
impact of DKK -2,302m from exchange rate movements. Gross profit margin
increased by almost 130bp to 49.1%. Gross profit was negatively impacted by
lower organic volumes but positively impacted by lower raw material costs in
Eastern Europe and declining non-material costs. Among other things it was also
impacted by the lean project in Northern & Western Europe, accelerated
efficiency initiatives, network optimisation and ongoing Excellence programmes
in the supply chain.
Sales and distribution expenses were DKK -15,989m, a reduction of DKK 1,603m
(+9%) compared to 2008. The lower sales and distribution expenses reflect
efficiency programmes within sales and logistics, the impact of lower volumes
and media deflation in 2009. The organic reduction was DKK 1,411m (+8%), net
acquired activities represented DKK -886m (-5%) and there was a DKK 1,078m (+6%)
impact from currencies. Administrative expenses amounted to DKK -3,873m (DKK
-3,934m in 2008) with organic reduction of DKK 125m (+3%), net acquired
activities representing DKK -233m (-6%), and DKK 169m (+5%) impact from
currencies. All in all organic development in sales and distribution expenses
and administration expenses was DKK +1.5bn or +7%.
Other operating income, net, was DKK -45m (DKK 728m in 2008). The decrease was
expected and the result of significant real estate gains in the first half of
2008. The Group's share of the net profit of associates was DKK 112m against DKK
81m in 2008.
Operating profit before special items was DKK 9,390m against DKK 7,978m in 2008.
Beverage activities generated a profit of DKK 9,460m, an increase of DKK 1,856m
with strong organic growth representing DKK 2,122m (+28%) and net acquired
activities DKK 788m of the increase. All regions contributed positively to the
increase in operating profit. The Group achieved an operating margin of 15.8%,
up 250bp compared to 2008.
Net special items amounted to DKK -695m against DKK -1,641m in 2008 and mainly
comprise restructuring and redundancy costs in Northern & Western Europe and
losses on excess contracting of raw materials. A more detailed specification is
shown in note 4.
Net financial items amounted to DKK -2,990m against DKK -3,456m in 2008. Net
interest costs accounted for DKK -2,161m compared to DKK -2,386m in 2008. The
lower interest costs are primarily due to a decrease in average funding cost.
Other net financial items were DKK -829m (DKK -1,070m in 2008) and were mainly
related to losses on debt denominated in foreign currency, primarily in the
first half of the year of DKK 581m (Eastern Europe approximately DKK 400m) and
write-downs on financial assets of DKK 119m. The decline in other net financial
items is among other things explained by the one-off costs in 2008 related to
the establishment of financing for the S&N transaction.
Tax totalled DKK -1,538m against DKK 312m last year. The effective tax rate in
2009 was thus 27%.
Consolidated profit was DKK 4,167m against DKK 3,193m in 2008 (+31%).
Carlsberg's share of net profit was DKK 3,602m against DKK 2,621m last year
(+37%).
STATEMENT OF FINANCIAL POSITION
At 31 December 2009, Carlsberg had total assets of DKK 134,515m (DKK 142,639m at
31 December 2008). The decrease relates to a reduction in property, plant and
equipment, current assets and foreign exchange movements, the last-mentioned in
particular from the Russian rouble (RUB) impacting intangible assets and
contributing to a reduction in current assets.
Assets
Intangible assets totalled DKK 81,611m against DKK 84,091m at 31 December 2008.
The decrease is related to foreign exchange impact mainly from the RUB as no
material additions or impairment write-downs have been recognised in 2009.
Property, plant and equipment totalled DKK 31,825m, down DKK 2,227m from 31
December 2008. The development has mainly been driven by additions of DKK 2.8bn,
disposals of DKK
-0.4bn, depreciation of DKK -3.5bn and foreign exchange impact of DKK -0.6bn.
Financial assets amounted to DKK 5,850m (DKK 5,305m at 31 December 2008).
Financial assets mainly comprise associated companies, deferred tax assets and
trade loans. Apart from the establishment of the Nordic Getränke cooperation in
Germany, there have been no material fluctuations within the Group.
Current assets amounted to DKK 14,841m (DKK 19,029m at 31 December 2008). The
decrease is the result of the very strong focus, particularly in the second half
of the year, on inventories and receivables which has led to a significant
reduction in both items compared to year-end 2008.
Equity and liabilities
Total equity was DKK 59,489m (shareholders in Carlsberg A/S DKK 54,829m and
non-controlling interests DKK 4,660m). The decrease in equity compared to 31
December 2008 of DKK 0.4bn is mainly due to foreign exchange rate differences of
approximately DKK -3.1bn primarily as a result of the devaluation of net assets,
first and foremost in RUB, profit for the period of DKK 4.2bn, payment of
dividends to shareholders and non-controlling interests of DKK 0.8bn and
acquisition of non-controlling interests (in Latvia, Lithuania, Kazakhstan, the
Ukraine and Uzbekistan) of DKK 0.4bn and actuarial losses on pension plans of
DKK -0.4bn.
Net interest-bearing debt has been reduced from DKK 44.2bn as at 31 December
2008 to DKK 35.7bn as at 31 December 2009.
Total liabilities were DKK 75,026m (DKK 82,738m at 31 December 2008). Current
liabilities were DKK 24,960m (DKK 25,616m at 31 December 2008). Excluding the
current portion of borrowings, current liabilities totalled DKK 21,638m (DKK
20,325m at 31 December 2008) reflecting the focus throughout 2009 on working
capital improvement.
CASH FLOW
Free cash flow in 2009 amounted to DKK 10,549m as a result of the very intense
focus on cash flow, including net working capital and capital expenditures,
throughout the Group. The strong development is a reflection of the so called
"cash race" programme.
Cash flow from operating activities in 2009 was DKK 13,631m against DKK 7,812m
in 2008. The main contributors to the strong improvement of DKK 5,819m were
operating profit before depreciation and amortisation and change in working
capital. Operating profit before depreciation and amortisation was DKK 13,169m
against DKK 11,610m in 2008.
Change in working capital amounted to DKK 3,675m against DKK 1,556m in 2008. The
positive impact was driven by a significant reduction in inventories (DKK
1.6bn), lower receivables (DKK 1.0bn) and higher payables (DKK 1.1bn).
Paid net interests were DKK -1,597m (DKK -2,754m in 2008). The significant
change in payments is due to lower interest payments, payments in 2008 related
to the establishment of loan facilities linked to the acquisition of part of the
activities in S&N and currency instruments (mainly hedging of the GBP 200m bond
programme). Finally, in 2009 Carlsberg had a positive cash flow of approximately
DKK 400m from settlement of various hedges.
Cash flow from investing activities was DKK -3,082m against DKK -57,153m in
2008. Adjusting for the acquisition of part of the activities in S&N in 2008,
the decrease is essentially due to operating capital expenditures of DKK -2.8bn,
down 48% from 2008, and a change in financial assets of DKK +950m. The lower
operating capital expenditures are a result of the detailed planning for and
continuous follow-up during 2009, and the change in financial investments is
explained by prepayments and hedging instruments relating to the activities
acquired in S&N in 2008.
FINANCING
At 31 December 2009, Carlsberg's gross interest-bearing debt amounted to DKK
39.4bn and net interest-bearing debt amounted to DKK 35.7bn. The difference of
DKK 3.7bn is other interest-bearing assets, including DKK 2.7bn in cash and cash
equivalents.
Of the gross interest-bearing debt, 92% (DKK 36.1bn) is long term, i.e. with
maturity of more than one year, and consists primarily of facilities in EUR.
Net interest-bearing debt at 31 December 2009 was reduced by DKK 8.5bn compared
to 2008. The reduction reflects the very strong free cash flow. Net debt/EBITDA
at the end of 2009 was 2.7x.
In May 2009, Carlsberg established a EUR 3bn EMTN programme under which notes
with principal amounts of EUR 1bn and GBP 300m were issued. The proceeds were
used to refinance part of the debt related to the acquisition of parts of S&N.
Consequently, Carlsberg has no refinancing needs for a number of years.
Approximately 62% of net financial debt is at fixed rates of interest
(fixed-rate period exceeding one year).
INCENTIVE PROGRAMMES
In 2009 a total of 283,229 share options were granted to members of the
Executive Board and other key management personnel in the Carlsberg Group, of
which the Executive Board received 60,000 share options.
In addition, a total of 160,935 share options have been granted to other senior
executives and key management personnel as part of a new long-term incentive
programme. The number of options in this programme will change over the next two
years, depending on the terms in the incentive programme and developments in the
price of Carlsberg's B share.
The share options, in total 444,164, were granted to a total of 217 key
employees at an average exercise price of DKK 268.90 (2008: 683,915 (adjusted)
share options to 173 employees at an average price of DKK 446.90 (adjusted)).
In 2010 a total of approximately 150,000 share options will be granted to
approximately 95 persons (members of the Executive Board and other key
management personnel), of which 30,000 will be granted to the Executive Board.
The exercise price will be calculated as the average of the share price on the
first five trading days after publication of the present Company Announcement.
In addition, members of the long-term incentive programme will be granted share
options based on performance, programme terms and developments in the price of
Carlsberg's B share.
ANNUAL GENERAL MEETING
The Annual General Meeting will take place on Thursday 25 March 2010 at 4.30 pm
(CET) at Forum Copenhagen, Julius Thomsens Plads 1, Frederiksberg, Denmark.
BOARD RESOLUTIONS AND PROPOSALS TO THE ANNUAL GENERAL MEETING
The Parent Company recorded a loss of DKK -86m for 2009. As last year, the
Supervisory Board will recommend to the Annual General Meeting that a dividend
be paid of DKK 3.50 per share or a total of DKK 534m.
ANNUAL REPORT
The Annual Report for 2009 will be available at www.carlsberggroup.com no later
than 4 March 2010.
FINANCIAL CALENDAR FOR THE FINANCIAL YEAR 2010
The financial year follows the calendar year, and the following schedule has
been set for 2010:
4 March 2010 Annual Report for 2009 (available electronically)
25 March 2010 Annual General Meeting
11 May 2010 Interim results for Q1 2010
17 August 2010 Interim results for Q2 2010
9 November 2010 Interim results for Q3 2010 (changed from 16 November 2010)
Carlsberg's communication with investors, analysts and the press is subject to
special restrictions during a four-week period prior to the publication of
interim and annual financial statements.
DISCLAIMER
This company announcement contains forward-looking statements, including
statements about the Group's sales, revenues, earnings, spending, margins, cash
flow, inventory, products, actions, plans, strategies, objectives and guidance
with respect to the Group's future operating results. Forward-looking statements
include, without limitation, any statement that may predict, forecast, indicate
or imply future results, performance or achievements, and may contain the words
"believe", "anticipate", "expect", "estimate", "intend", "plan", "project",
"will be", "will continue", "will result", "could", "may", "might", or any
variations of such words or other words with similar meanings. Any such
statements are subject to risks and uncertainties that could cause the Group's
actual results to differ materially from the results discussed in such
forward-looking statements. Prospective information is based on management's
then current expectations or forecasts. Such information is subject to the risk
that such expectations or forecasts, or the assumptions underlying such
expectations or forecasts, may change. The Group assumes no obligation to update
any such forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.
Some important risk factors that could cause the Group's actual results to
differ materially from those expressed in its forward-looking statements
include, but are not limited to: economic and political uncertainty (including
interest rates and exchange rates), financial and regulatory developments,
demand for the Group's products, increasing industry consolidation, competition
from other breweries, the availability and pricing of raw materials and
packaging materials, cost of energy, production- and distribution-related
issues, information technology failures, breach or unexpected termination of
contracts, price reductions resulting from market-driven price reductions,
market acceptance of new products, changes in consumer preferences, launches of
rival products, stipulation of market value in the opening balance sheet of
acquired entities, litigation, environmental issues and other unforeseen
factors. New risk factors can arise, and it may not be possible for management
to predict all such risk factors, nor to assess the impact of all such risk
factors on the Group's business or the extent to which any individual risk
factor, or combination of factors, may cause results to differ materially from
those contained in any forward-looking statement. Accordingly, forward-looking
statements should not be relied on as a prediction of actual results.
MANAGEMENT STATEMENT
The Supervisory Board and Executive Board have discussed and approved the
Company Announcement on the financial statement as at 31 December 2009.
The Company Announcement on the financial statement as at 31 December 2009 has
been prepared using the same accounting policies as the consolidated financial
statements for 2009.
Copenhagen, 23 February 2010
Executive Board of Carlsberg A/S
Jørgen Buhl Rasmussen Jørn P. Jensen
Supervisory Board of Carlsberg A/S
Povl Krogsgaard-Larsen Jess Søderberg Hans Andersen
Chairman Deputy Chairman
Flemming Besenbacher Hanne Buch-Larsen Richard Burrows
Kees van der Graaf Niels Kærgård Axel Michelsen
Erik Dedenroth Olsen Bent Ole Petersen Per Øhrgaard
FINANCIAL STATEMENT
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Note 1 Segment reporting by region (beverages)
Note 2 Segment reporting by activity
Note 3 Segment reporting by quarter
Note 4 Special items
Note 5 Debt and credit facilities
Note 6 Net interest-bearing debt
Note 7 Acquisition of entities
This statement is available in Danish and English. In the event of any
discrepancy between the two versions, the Danish version shall prevail.
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| The Carlsberg Group is one of the leading brewery groups in the world, with |
| a large portfolio of beer and other beverage brands. The flagship brand - |
| Carlsberg - is one of the best-known beer brands in the world and the |
| Baltika, Carlsberg, and Tuborg brands are among the six biggest brands in |
| Europe.. More than 43,000 people work for the Carlsberg Group, and its |
| products are sold in more than 150 markets. In 2009 the Carlsberg Group sold |
| more than 135 million hectolitres of beer, which is about 114 million |
| bottles of beer a day. |
| Find out more at www.carlsberggroup.com. |
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INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTE 1 (PAGE 1 OF 2)
Segment reporting by region (beverages)
NOTE 1 (PAGE 2 OF 2)
Segment reporting by region (beverages)
NOTE 2
Segment reporting by activity
NOTE 3
Segment reporting by quarter
NOTE 4
Special items
NOTE 5 (PAGE 1 OF 2)
Debt and credit facilities
NOTE 5 (PAGE 2 OF 2)
Debt and credit facilities
NOTE 6
Net interest-bearing debt
NOTE 7
Acquisition of entities
The purchase price allocation of the fair value of identified assets,
liabilities and contingent liabilities in the acquisition of part of the
activities in S&N was completed in April 2009 and for the acquisition of
Baku-Castel Brewery in August 2009. The final allocation of fair value resulted
in total net assets of DKK 21.2bn, a decline of DKK 0.2bn compared to the
preliminary allocation 31 December 2008, and total goodwill amounts to DKK 34bn,
an increase of DKK 0.2 bn. Furthermore, there have been some reclassifications
between the individual balance sheet items. Adjustments will be made to the
purchase price depending on the final allocation of debt according to agreement.
