Carlsberg's Russia writedown 'just a bookkeeping exercise,' says CEO after earnings miss

  • Carlsberg took control of Russia's largest beer brand Baltika in 2008 but has since struggled.
  • Hostile factors in its main eastern European market include attempts by the government to tackle alcohol abuse by raising taxes and limiting the size of plastic beer bottles, as well as a weak overall economy.

Carlsberg has written-down its Russia brand following a drop in sales, but Cees 't Hart, chief executive of the world's third-largest brewer, has sought to allay investor fears.

"We had to take a write-off, but that's basically from the brand Baltika," he told CNBC Wednesday, but described the move as "just a book keeping exercise with regards to the value of the brand."

"The Russian beer market has declined over the years," he explained.

Carlsberg took control of Russia's largest beer brand Baltika in 2008 but has since struggled. Hostile factors in its main eastern European market include attempts by the government to tackle alcohol abuse by raising taxes and limiting the size of plastic beer bottles, as well as a weak overall economy.

"We have improved significantly our margins in Russia," he detailed, though he acknowledged that market share had fallen "as a consequence of the fact that some of our competitors took a different tactic after the Russia ban for PET (plastic) bottles."

But, "we think in three angles" he said: "margins, volume and profit." "We have two hits out of three … And our competitors have one out of three because they have the volume and not the margins, not the profit."

"Do you want to shift beer, or do you want to earn money as well?" the CEO said.

Cancan Chu | Getty Images

In its full-year earnings report out Wednesday, Carlsberg said it expected operating profit to grow by a percentage in the mid-single-digits this year and that it would increase dividend payout, after posting 2017 sales below analysts' expectations.

Net profit without impairments rose to 4.93 billion Danish crowns ($820.08 million) in 2017, slightly above the 4.86 billion crowns expected by analysts in a Reuters poll. Carlsberg gave no quarterly earnings figures.

However, fourth-quarter sales fell to 13.36 billion crowns, missing the 13.63 billion seen in the poll.

Carlsberg's shares were trading nearly 4.4 percent lower on Wednesday at 1:00 p.m. London time.

The brewer said it would recommend increasing the dividend payout for 2017 by 60 percent to 16 crowns per share.

"(The fourth quarter) is not the most eventful quarter in beer," 't Hart added, but "despite that we have a very good set of results." "In general we are satisfied with 2017."

—Reuters contributed to this report.