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Carlsberg lowers outlook as Russian hangover continues

Reuters with

Danish brewer Carlsberg reported a weaker than expected first quarter capped by a weak Russian rouble and declining sales in Eastern Europe and lowered its outlook for 2014 net profit and for the Russian beer market.

Carlsberg, the world's fourth-largest brewer, maintained its expectations for operating profit to grow organically by high-single digit percentages in 2014, but said that the reported results are expected to be impacted more negatively by currencies than previously anticipated.

Chris Ratcliffe | Bloomberg | Getty Images

The group said that it now only expects reported adjusted net profit to grow by low-single-digit percentages in 2014, down from an earlier guidance of mid-single digit growth.

The company's president and CEO, Jørgen Buhl Rasmussen, told CNBC that the uncertain situation in Russia and Ukraine had hit business.

"We thought going into the year the Russian beer market would finally get to the point where it would be close to maybe flattish or slightly declining," he said. "Then we have this event happening in Ukraine and Crimea having a very negative impact on the Russian macro economy…and we think if anything it will only get slightly worse and that will also negatively impact the consumer sentiment in Russia."

Carlsberg, the maker of Baltika, Tuborg and Kronenbourg 1664, said the Russian market is now assumed to decline by mid-single-digit percentages in beer volume in 2014, against an earlier guidance of a low-single-digit decline.

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Carlsberg, the market leader in Russia, has suffered from a slowing of the economy there and a law banning the sale of alcohol from street kiosks, which combined led to an 8 percent slump of the Russian beer market last year.

Last year, Rasmussen told CNBC he was concerned about the regulations being implemented in Russia, as the government began to clamp down on alcohol consumption. Now, the political situation was beginning to weigh.

Operating profit before special items fell to 453 million Danish crowns ($84.56 million) from 680 million a year ago and below a forecast for 749 million crowns in a Reuters poll.

However, Rasmussen told CNBC that with "very strong performance in Western Europe and a very positive performance in Asia, we believe are able to compensate across the group for a more negative development in Russia."

Carlsberg's sales fell 14 percent in Eastern Europe in the first quarter, which was slightly more than expected by the analysts.

In Asia sales grew by 21 percent, which was much weaker than expected, and in Western Europe sales grew by 2 percent.

Rasmussen added that the first quarter was not too important a quarter to focus on, as it accounted for "maybe 5 percent of the annual EBIT (earnings before interest and taxes)."

"That's why we are always stating again and again, be careful not to read too much into trends and numbers in a very small quarter," he said, "Because a change in a promotion or activity can do a lot to year-on-year comparisons."

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