Carlsberg suspends share buyback as profits dwindle

13 August, 2020

Danish brewer Carlsberg expects to report an organic operating decline of 10% to 15% this year as a result of on-trade closures.

The world’s third largest brewer suspended the second tranche of its share buyback and warned it would have to adapt its business due to trading volatility.

Q2 sales decreased 14.6% year-on-year to 15.9 billion krone ($2.5 billion), with volumes down 7.7%.

Tuborg was the worst affected brand, as volumes decreased 19% in the three-month period. Carlsberg volumes were down 13% and Grimbergen volumes declined 4%, but Somersby cider was down just 2% and 1664 Blanc actually grew 10%.

Carlsberg scrapped its guidance earlier this year due to uncertainty caused by the Covid-19 pandemic.

It said sales are picking up in Europe and Asia, but added that local lockdowns and consumer reticence to visit bars will result in difficult trading conditions for the rest of the year.

Chief executive Cees ’t Hart said: “The Covid-19 pandemic is impacting lives worldwide. During these difficult times, our top priority remains the health and well-being of our employees, while at the same time taking the required actions to protect the health of our business.

“All our markets have to a greater or lesser extent been impacted by the COVID-19 pandemic, but the organisation and our people have shown tremendous resilience and flexibility, allowing us to stabilise the business, help society and support our customers. To mitigate the impact of weaker volumes and mix, we’ve reinforced our focus on costs, cash and liquidity.

“Recognising that we’re faced with a new market reality, including changed consumer preferences and a reduced level of on-trade activity, we’re taking measures to adapt our business accordingly.”

Carlsberg said earning expectations are difficult to forecast due to uncertainty around the pandemic and the steps governments will take to combat it.

The firm recently announced a £273 million deal to take a controlling stake in a new joint venture in the UK called Carlsberg Marston’s Brewing Company. It decided to suspend the second phase of a share buyback due to the Marston’s deal and “possible other inorganic opportunities.”

Rivals like Heineken and AB InBev have also both reported sharp declines in earnings so far this year.

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