Denmark/China: Carlsberg’s strong 2019 results overshadowed by negative outlook

“2019 was a year of good performance, with organic revenue growth, margin expansion, strong cash flow and a significant increase in cash returns to shareholders,” according to Carlsberg’s annual report 2019 which was issued today. “We’re pleased with our results in 2019. We saw healthy top-line growth, strong margin improvement and strong cash flow,” endorses Cees ’t Hart, CEO of the Carlsberg Group.

However, the good results in 2019 are overshadowed by a negative outlook for the business in Asia which accounts for about one quarter of all sales of the Danish brewer. The coronavirus outbreak harms daily life in China and dampens beer consumption.

T’Hart expects Carlsberg’s revenue from China to be “impacted severely” in the first quarter, the CEO said in an interview. As a preemptive measure, Carlsberg has asked its top 60 managers to cut costs even deeper and to put temporarily on hold some advertising initiatives in the country. Depending on the course of the Corona pandemic, Carlsberg will decide on an extended shutdown of some breweries in China following the Lunar New Year holiday.

For 2019, the Group defined three overall financial priorities: drive organic revenue growth, maintain tight cost control and continue to exercise strict cash discipline.

Despite tough comparables in Western and Eastern Europe and an intensified competitive environment in Russia, the Group delivered well against these priorities, the companies says in its annual report.

Group beer volumes were 112.5m hl, declining organically by 0.6%, with growth in Asia offset by lower volumes in Western and Eastern Europe. Non-beer volumes were 22.4m hl, growing organically by 3.9%. Total organic volume growth was 0.1%, while reported growth was 1.4%, positively impacted by the increased ownership in Cambrew from August 2018.

Revenue was DKK 65.9 billion (USD 9.66bn). Organic growth was 3.2%, due to the positive 3% price/mix. Price/mix was supported by the growth of premium products and Carlsberg’s value management initiatives, including price increases.

Reported revenue growth was 5.4%, driven by a positive currency impact and the Cambrew acquisition (, 1.11.2019). Gross profit was DKK 32.6 billion (USD 4.78bn). Organic growth was 3%, with price/ mix more than compensating for the 3% organic increase in cost of sales per hl. The reported gross margin declined by 50bp to 49.5% as a result of higher input costs, declining volumes in Russia, due to the challenging competitive environment, and the consolidation of Cambrew.

Operating expenses excluding distribution expenses declined organically by 1%, thanks to a continued focus on driving efficiencies and maintaining tight cost control, as the company states. Excluding the higher marketing expenses, operating expenses declined organically by 2%. Depreciation and amortisation increased by DKK 0.5 billion (USD 73 million) to DKK 4.5 billion (USD 660 million), primarily related to the implementation of IFRS 16 “Leases”. Operating profit before depreciation, amortisation and impairment losses (EBITDA) was DKK 15.0 billion (USD 2.2bn), up organically by 10.0% and by 11.8% in reported terms, positively impacted by IFRS 16.

Excluding the impact of IFRS 16, organic growth would have been around 7%. Operating profit increased organically by 10.5%, driven by strong growth in Asia and Western Europe, which more than offset the decline in Eastern Europe. Reported operating profit was DKK 10.5 billion (USD 1.54bn), corresponding to 12.2% growth. The reported operating margin improved by 100bp to 15.9%

Share this article: