Carlsberg, the Danish brewer known for brands such as Tuborg and Carlsberg beer, has once again raised its annual profit forecast after a strong first half of the year. The company increased beer prices to counter rising costs, resulting in a better-than-expected operating profit growth of 5.2% for the first half. Carlsberg now expects annual operating profit growth of 4% to 7%, compared to previous guidance of minus 2% to 5%. This upgrade marks the second time since April that Carlsberg has revised its profit outlook due to continued price increases.
The news of Carlsberg’s improved profit forecast led to a nearly 3% increase in the company’s shares. This comes as big brewers have been grappling with higher input costs, including grains, freight, and aluminum, and implementing significant price hikes to offset these expenses. Carlsberg’s rival, Heineken, recently cut its profit forecast after consumers in some markets switched to cheaper beer options. However, Anheuser-Busch managed to exceed analysts’ expectations with strong growth in Latin America, despite a marketing setback in the US that resulted in a decline in Bud Light sales.
Carlsberg’s first-half performance exceeded analyst consensus estimates, with organic revenue rising by double digits primarily due to price increases. However, volume growth was slightly below forecasts at less than 1%. Analysts noted that the upgrade in profit guidance was expected, as the previous guidance was likely too conservative. Mads Rosendal, a credit analyst at Danske Bank, commented that the upgrade was positive but not surprising.
Next month, Jacob Aarup-Andersen, a turnaround expert who previously revamped facility management company ISS, will assume the role of CEO at Carlsberg, replacing Cees ‘t Hart. Carlsberg’s consistent over-delivery on targets has become a pattern that the market has grown accustomed to, according to Edward Mundy, an analyst at Jefferies. Mundy also suggested that the updated guidance may reflect an element of conservatism, given an easier prior-year comparison in the second half and the upcoming change in leadership.
In addition to the profit forecast upgrade, Carlsberg announced a 1 billion-krone ($146 million) share buyback program. This move follows rival Heineken’s recent decision to cut its earnings forecast due to weakening consumption following double-digit price increases. Heineken reported a 22% decline in adjusted operating profit for the first half, with beer volume dropping more than expected. The Dutch brewer anticipates that cost inflation will ease next year, reducing the pressure to raise prices. Previously, Heineken had forecast mid- to high-single digit earnings growth.
Heineken attributed more than half of the drop in first-half consumption to Vietnam and Nigeria, while demand in the Americas remained soft. The company holds a dominant position as the largest premium brewer in Vietnam, where it has been active for three decades and sells popular brands such as Tiger.