Costs force Carlsberg to backtrack on targets

Carlsberg, the world’s fourth-largest brewer, today scrapped its medium-term profit margin targets, blaming unpredictable raw material and energy costs and increased investment in its supply chain.

The original target, set two years ago, had been to achieve operating profits of 20% of sales within three to five years.

Carlsberg also reported flat profits for 2012 at 9.8 billion Danish krone (£1.1 billion) and a fall in operating margins to 14.6%. The final quarter was worse than analysts had forecast and the shares were the largest faller in the main European index, losing 28.5 krone to 574 krone.

The brewer blamed subdued consumer spending and bad weather in the summer, with sales off 3% in Western Europe and flat in Russia where the government has been taking measures to reduce drinking. Carlsberg has just over 38% of the Russian beer market.

Looking ahead, it said it now expected 2013 operating profits to be only slightly higher at 10 billion krone. It expects market conditions in its three regions of Western Europe, Eastern Europe and Asia to be similar to 2012.

Scrapping its margin targets, the brewer said: “The margin targets have proved difficult to use as internal and external performance targets, as several events, both within and beyond our control, have and will continue to impact margins — such as costs related to the supply chain integration and business standardisation project as well as a volatile input cost environment, especially in Eastern Europe.”

The brewer said it would concentrate efforts on developing its premium beer brands Carlsberg, Tuborg, Kronenbourg 1664 and Grimbergen and its cider brand Somersby.