Carlsberg A/S share price down, projects 2014 full-year operating profit decline due to falling sales in Russia

Denmark-based brewer Carlsberg A/S said in an official statement today that it expects its full-year operating profit to fall from a year earlier due to worsening conditions in Russia, which accounts for more than a third of its total profits.

The revenue and earnings warning caused the companys shares to drop by nearly 7% in intraday trading. Carlsberg A/S is not the only brewer that has been facing difficulties due to increasing political tension in Eastern Europe, which affected economic stability.

Major brewers worldwide have recently been put under pressure mainly due to decreasing customer interest. The political tension between Russia and its western trading partners, as well as unrest in the Middle East, have also weighed on the companies performance.

One of the analysts, who work at Jyske Bank – Mr. Frans Hoyer commented for Bloomberg: “Conditions are difficult and apparently getting worse. Rather than finding some type of stabilization now given several years of volume decline, it looks we are in for another bout of decline in the next several quarters.”

According to the companys statement, Carlsberg A/S projected that its 2014 operating profit will decrease by low- to mid-single digit percentage points. In comparison, the Denmark-based brewer had initially projected growth of low single-digit percentage points. This is the second time when Carlsberg is reducing its full-year forecast this year. The company started 2014 with the projection of a mid-single digit operating profit increase, but in March cut its projection after the Russian annexation of Crimea.

Carlsberg A/S said in its statement: “In order to mitigate the risks as much as possible, several changes have been and will be made in our Eastern European business, including structural changes. These include considerations related to brewery closures.”

Carlsberg A/S lost 3.71% by 13:51 GMT to trade at 519.50 Danish kroner per share in Copenhagen, marking a one year change of -7.81%. The brewer is valued at 83.16 billion kroner. According to the Financial Times, the 26 analysts offering 12-month price targets for Carlsberg A/S have a median target of DKK580.00, with a high estimate of DKK860.00 and a low estimate of DKK490.00. The median estimate represents a 7.51% increase from the last close of DKK539.50.