Research and Markets - Carlsberg Seek to Address Debt Incurred in Russia and Ukraine

Mar 16, 2016, 12:27 ET from Research and Markets

DUBLIN, March 16, 2016 /PRNewswire/ --

The global beer market is expected to grow at a CAGR of 2.97% during the 2014-2019 period, according to a report available from Research and Markets. The report states that the growth of the global beer market is directly proportional to global economic conditions, a fact Carlsberg A/S know all too well. The world's fourth-biggest brewer has revealed its financial strategy for 2016-2022, which seeks to address debt incurred by the company as a result of the declining value of the ruble and trouble in Ukraine.

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Carlsberg plans to pay half its earnings in the form of dividends, a move the Danish brewer hopes will keep company debt at less than two times earnings before interest, tax, depreciation and amortization. Excess cash will be distributed through extraordinary dividends and buybacks. Carlsberg is also cutting jobs at a number of breweries it intends to close. The company has experienced a steep decline in beer sales in Russia and Ukraine over the past five years.

The conflict in Ukraine, where Carlsberg own three breweries, has understandably led to a diminished market. A recent report found that the production of malt in the Ukraine dropped by almost 14% between 2014-2015, and brewers operating in the country are subject to strict excise duties. The report notes brewers are being forced to rethink their strategy, and how most products launched in 2015 fall into the discount or traditional beer sectors.   

Russia, where Carlsberg is the largest beermaker through ownership of Baltika Breweries, is struggling with a declining ruble, resulting in a shrinking beer market. Russian consumers' purchasing power in 2015 was seriously eroded compared to 2014, and there was a partial shift of low income consumers from the economy beer segment to home-made spirits, as stated in an industry report. The report states that beer markets continue to decline with economic conditions affecting purchasing power. Carlsberg may be required to manufacture new products more in line with low consumer buying trends if they wish to salvage this market.

For further information on this topic, and a full list of all related documentation, please visit the Beer section at http://www.researchandmarkets.com/rm/NHIJ.

Source: http://www.bloomberg.com/news/articles/2016-03-16/carlsberg-to-distribute-half-of-earnings-in-form-of-dividends

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