Earnings

Carlsberg sales grow but Russia weighs on earnings

Baltika beer, made by Carlsberg
Alexander Zemlianichenko Jr | Bloomberg | Getty Images

Carlsberg posted a third quarter operating profit before special items on Monday in line with the same quarter last year as a growing Asian market offset challenges in Russia, the Danish brewer's largest market.

Operating profit for the quarter was 3.390 billion Danish crowns ($569 million) from 3.392 billion crowns a year ago after a 4 percent increase in sales.

Though sales fell 15 percent in Russia, which accounts for about a third of the company's total operating profit, revenues in Asia grew 61 percent thanks to acquisitions and the sale of higher quality beer.

"The group managed to deliver organic earnings growth and increased cash flow despite the market challenges in Eastern Europe," chief executive Jørgen Buhl Rasmussen said in a statement.

Nevertheless, analysts said investors would keep focusing on Carlsberg's struggles in Russia, where the ruble has fallen by almost 8 percent in the past week.

A stand-off between Moscow and the West over a rebellion in eastern Ukraine which has led to Western sanctions and from Russia's side, a ban on European produce, is pressuring the ruble currency and hitting Russian growth.

"As currencies look right now, the growth expected in earnings next year from efficiency savings in Russia and in Europe is more or less wiped out due to the depreciation of the ruble," Alm. Brand analyst Michael Friis Jorgensen said.

Carlsberg's brands includes Baltika, the most popular beer brand in Russia and the former Soviet Union by far.

The Danish brewer has not been directly affected by the stand off with Russia as its beer production is in the country, but the lower ruble, slower economic growth as well as new regulations that discourage beer sales have all taken a toll.

Carlsberg shares have dropped more than 16 percent since the beginning of the year as the crisis with Russia over Ukraine escalated. The benchmark index has risen 17 percent.