Denmark: Carlsberg withdraws positive outlook for 2020

Due to the significantly increased uncertainty of the COVID-19 pandemic to business performance and in line with other brewing groups like AB InBev and Molson Coors, Carlsberg has decided to suspend guidance for the year and to launch several additional cost reduction initiatives to mitigate the earnings impact of the lost volume.

“The recent rapid increase in lock-downs of key markets and the uncertainty about the further development of the pandemic make us unable to estimate the full impact of COVID-19 on our business. Consequently, we’ve decided to suspend our 2020 guidance,” said Carlsberg’s CEO Cees ’t Hart in a statement today. “As the situation is unprecedented and continuously evolving, it is difficult to make any reliable short-term predictions for the business impact,” Carlsberg wrote in the statement.

When releasing its 2019 results on February 4, 2020 (, 4.2.2020) Carlsberg was still optimistic to achieve a “mid-single-digit percentage organic growth in operating profit”. However, at that time the group already saw “a more volatile business environment including the current coronavirus outbreak in China, of which the full impact is not yet known.”

“Across our markets, governments have already imposed and are increasingly imposing severe measures, including closure of on-trade outlets and limitations on, or even closure of, businesses, limitations on social gatherings, travel restrictions and cancellation of sporting and entertainment events,” Carlsberg said today.

According to the statement, the development in China has largely been in accordance with Carlsberg’s planning. January saw strong volume development, while volumes were significantly down in February and there were signs of recovery in March. Sales and production in some other Asian markets outside China are increasingly being impacted as governments are implementing stringent restrictions to combat the spread of COVID-19, including closures of on-trade outlets.

In Western Europe Carlsberg’s numbers in January and February were in line with its expectations. In March, the Danish brewer saw a significant impact from COVID-19. In most markets, the on-trade channel is being severely impacted. Off-trade is currently less impacted, although increasing restrictions on social gatherings are expected to impact volumes in the off-trade as well. In addition, Carlsberg has seen a negative product mix in the off-trade channel, as consumers shift their purchasing towards multipacks and show less demand for craft & speciality products.

For the first quarter, Carlsberg saw good results in Eastern Europe with less severe impact of COVID-19. However, as governments accelerated restrictions during the last couple of weeks of March, a negative impact on consumer demand could be noticed and a further increase impact can be anticipated. Overall, however, Carlsberg expects a less negative impact than in Western Europe due to the smaller on-trade sector in Eastern Europe.

To mitigate the negative effects of COVID-19 in all markets, Carlsberg is “taking additional measures to reduce costs, mainly targeting specific cost groups, such as consultants, training, facilities, technology, travel and entertainment.” In addition, Carlsberg has “implemented hiring restrictions and [is] looking to reduce marketing and promotional spend where this can achieve short-term savings without impacting the long-term health of [the] brands.”

In addition, Carlsberg is “reviewing and reducing or postponing capital expenditures.” Specifically, the company anticipates “lower on-trade investments and lower investments in returnable glass bottles.” With respect to working capital, Carlsberg sees “a risk of a weaker working capital this year compared with [its] achievements in recent years. Some customers will be subject to financial distress and, consequently, there is a risk of higher losses on debtors.”

Despite all the foresaid, Carlsberg stresses the fact that its balance sheet, credit situation and liquidity remain strong. At the end of 2019, net interest-bearing debt/EBITDA was 1.25x. On 4 March, the group successfully placed a EUR 500m 10-year bond with a coupon of 0.625% and this week Carlsberg has obtained a 1-year fixed-term bank loan of EUR 500m. In addition, the brewer has a EUR 2bn committed revolving credit facility, on which it has so far only made very limited drawings. “We do not have any upcoming material refinancing needs,” Carlsberg concludes its today’s message.

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