Carlsberg: Markets Likely Want To See More From Volumes

seekingalpha08-15

Revenue growth wasn't that great, while operating profit performance and outlook improved on favourable hedged COGS effects and mix effects. This impact was good given increased marketing.The San ...

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This impact was good given increased marketing.The San ...</p>\n\n<a href=\"https://seekingalpha.com/article/4714838-carlsberg-markets-likely-want-to-see-more-from-volumes\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Carlsberg: Markets Likely Want To See More From Volumes</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCarlsberg: Markets Likely Want To See More From Volumes\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-15 22:59 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4714838-carlsberg-markets-likely-want-to-see-more-from-volumes><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Revenue growth wasn't that great, while operating profit performance and outlook improved on favourable hedged COGS effects and mix effects. This impact was good given increased marketing.The San ...</p>\n\n<a href=\"https://seekingalpha.com/article/4714838-carlsberg-markets-likely-want-to-see-more-from-volumes\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4158","symbol_name":"啤酒酿造商","start_time":0,"source_url":"https://seekingalpha.com/article/4714838-carlsberg-markets-likely-want-to-see-more-from-volumes","article_id":"2459479970","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1815291976/image_1815291976.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2459479970","pubTimestamp":1723733975,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Revenue growth wasn't that great, while operating profit performance and outlook improved on favourable hedged COGS effects and mix effects. This impact was good given increased marketing.The San Migu","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4158":"啤酒酿造商","BK4177":"软饮料","BK4534":"瑞士信贷持仓","BK4585":"ETF&股票定投概念","LU0234572021.USD":"高盛美国核心股票组合Acc","PEP":"百事可乐","BK4533":"AQR资本管理(全球第二大对冲基金)","BK4566":"资本集团","LU1894683264.USD":"AMUNDI FUNDS US EQUITY RESEARCH VALUE \"A2\" (USD) ACC","IE00B3T34201.USD":"BNY MELLON GLOBAL EQUITY INCOME \"B\" (USD) INC","BK4588":"碎股","BK4550":"红杉资本持仓","LU1244550221.USD":"FRANKLIN GLOBAL MULTI-ASSET  INCOME \"A\" (USDHEDGED) INC (M)","LU1244550577.SGD":"FTIF - Franklin Global Multi-Asset Income A (Mdis) SGD-H1","CABJF":"Carlsberg AS","BK4504":"桥水持仓","LU1244550494.USD":"FRANKLIN GLOBAL MULTI-ASSET INCOME \"A\" (USDHEDGED) ACC","LU1894683348.USD":"AMUNDI FUNDS US EQUITY RESEARCH VALUE \"A2\" (USD) INC","CABGY":"Carlsberg AS","BK4581":"高盛持仓","BTVCF":"Britvic plc"},"translate_title":"嘉士伯：市场可能希望看到更多销量","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BTVCF":1,"PEP":1,"CABJF":1,"CABGY":1},"content_text":"Revenue growth wasn't that great, while operating profit performance and outlook improved on favourable hedged COGS effects and mix effects. This impact was good given increased marketing.The San Miguel partnership is coming to an end and will be a 3% or so headwind on revenues and probably operating profit.Britvic will raise debt levels and interest costs, making net income growth difficult. The dividend seems safe.Nothing hair-raising, but also not particularly compelling at current valuations.stigalenas/iStock Editorial via Getty Images Carlsberg A/S (OTCPK:CABGY)(OTCPK:CABJF) did not get a great response from the markets when they released earnings. We covered CABGY just before the earnings and pointed out the fact that there might be a disappointment. We were focused on the fact that despite a strong sports season for beer, competitors weren't doing well either, and it was unlikely that Carlsberg, being one of the most expansive beer and beverage companies in the world, would buck the trend. They didn't buck the trend. While there might be a nice logic to the Britvic plc (OTCQX:BTVCF) acquisition, markets received this earnings report as being a slight disappointment in terms of sales. The operating profit outlook even improved on mix effects and lower COGS, but that's not what markets wanted to hear. There's still not much of a value case as interest expenses are set to rise and the San Miguel partnership ending pressures net incomes, although maybe next quarter will see incremental volume strength on better weather effects and the more exciting half of the Euros plus the Olympics kicking in. There could be a short-term play, but it's not exciting enough for us. Latest Earnings The operating profit outlook improved.  So please go to Slide 13 and the earnings outlook for the year. Yesterday, we adjusted our outlook for organic operating profit growth for the year to 4% to 6% compared to our previous expectation of 1% to 5% growth. Ulrica Fearn, Chief Financial Officer Carlsberg  Organic growth in revenues was 3.9%, below the growth in operating profits which grew 4.7%. Headline Figures (H1 Pres) This was driven by a decline in the cost of sales by 1%. This is partially from mix effects, where revenue growth was more pronounced in cheaper markets, and cost control as well as COGS inputs were tending towards deflation in some areas, such as freight, energy, and aluminum, but not barley and sugar which is up. Glass and labour are also up. They will be less hedged in 2025, which should mean higher COGS incrementally. The mix effects were favourable in terms of general margin as well, with growth in the mix of the higher margin markets in Asia and CEE. Revenue per hectolitre was also up meaning that they are pushing into better value products despite slight down trading in China apparently within the premium segment. Also, weather effects hit China but also other markets in higher margin segments out-of-home, so the passing of that issue should be an incremental help. These mix effects were also important as there is planned growth in the marketing expense line. Marketing expenses are up around 20% organically, but overall operating expenses are up 9.6% organically, representing decent cost control in other areas. However, the issue of lots of marketing dollars chasing the same markets is definitely playing out and was a concern in our previous coverage. The lowest margin market is the more mature and heavily taxed Western European markets, also tending towards more health consciousness. This is why the alcohol-free Britvic acquisition, which focuses on the UK market, was strategically sound. PepsiCo, Inc. (PEP) uses Britvic as a bottler of a lot of key brands like Mountain Dew. There was a change of control clause that might have ended the deal, but it has been waived and Carlsberg will benefit as owners of Britvic of that continued partnership which gives Carlsberg access to those big brands for the UK market. They are also entering some strategic partnerships with craft brewers. This is essential for large companies like Carlsberg because craft breweries are the only growing market these days within a pie that is shrinking overall. Bottom Line A significant operating profit outlook revision is nice, but markets will tend to want to see more underlying strength in the markets which was lacking despite a strong sports season with Euros (half included this quarter, the more exciting half for England next quarter). Beverages in some areas are becoming at risk of being a secularly declining market. In mature Western markets, it is already often the case that pricing drives growth as health consciousness and alcohol taxes begin to affect these core markets. Eastern Europe remains a bastion of demand for these products also with solid margins, and parts of Asia are constructive, although weak currencies in some markets have been responsible for the discrepancies between the organic and reported figures. While there has been a 6% decline since our last coverage, that doesn't really change any element of the value case. It is still in its same relative position in the pack, and the 15.5x TTM P/E represents a fair multiple, in line with long-term market averages, that doesn't have us chomping at the bit in terms of absolute valuations - certainly not when the Britvic acquisition is 100% debt financed in a high cost of capital environment. Net interest bearing debt is about to double. Interest expenses were already up a lot YoY due to the higher debt cost environment. The dividend should be fine, as payout ratios are not that much higher than 50% currently, and net income should only decline around 12% on the interest rate effect incrementally. Still, deleveraging will be the name of the game for them. It's not a bad thing, but coming down to valuation, particularly with a lack of net income growth, it's not that compelling. Maybe there's a short-term play in the next quarter including the Olympics and the latter half of the Euros with England in the final. San Miguel news is not that great either, with that partnership coming to an end soon. This is around 1.4 billion DKK, so around 2% or so of annual sales with decent margins. Great that they are guiding for profit growth despite that, but it will make it harder starting December 31, 2024.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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