Danish brewer Carlsberg on Wednesday said it would cut 2,000 jobs to improve earnings after it reported a third-quarter loss because of its struggling Russian and Chinese businesses.
The new cost-cutting program, which unifies previous and new cost savings, contains impairment and restructuring costs of 10 billion Danish kronor ($1.44 billion) for the 2015 to 2017 period, of which around 8.5 billion kronor will be charged in 2015. The program is expected to deliver annual benefits of 1.5 billion kronor to 2 billion kronor by 2018.
“Acknowledging the fact that the profit development of recent years has not been satisfactory, we are taking further steps to prepare the Carlsberg Group for the future,” said Cees’t Hart, Carlsberg’s new chief executive. Mr. Hart, who’s only been in the job for five months, is working on a comprehensive review of the company’s strategy which he said he expects to present by the end of the first quarter next year.
Due to the reclassification of one-off items in the U.K. and restructuring costs in the fourth quarter, organic operating profit is expected to be lower than previous expectations, the company said.
Despite swinging to a full-year loss, the company said it still expects to propose an unchanged full-year dividend per share of 9 kronor.
Carlsberg has struggled for years in Russia amid law changes intended to curb alcohol consumption, sanctions from the West and a generally deteriorating economic climate.
The world’s fourth-largest brewer said net loss for the three months ended Sept. 30 was 4.50 billion kronor, compared with a profit of 2.10 billion kronor the same period last year due costs of 7.7 billion kronor, mainly related to impairment of Russian brands and Eastern Assets in China. Analysts polled by FactSet expected net profit of 1.85 billion kronor.
Sales in the third quarter were 18.30 billion kronor, up from 18.12 billion kronor last year. Operating profit before special items was 3.47 billion kronor, up from 3.39 billion kronor.
Last quarter, Carlsberg cut guidance for its full-year earnings on lower sales in its main markets and said that while the organization was cutting costs and improving efficiency, the effects weren’t being felt as quickly as planned.
The brewer maintained Wednesday that it expects its organic operating-profit to decline slightly in 2015, having previously expected mid- to high-single-digit growth.
Mr. Hart, said the company is monitoring the planned combination of the world’s two biggest brewers, Anheuser-Busch InBev NV and SABMiller PLC, but has no plans to make mergers and acquisitions itself.
AB InBev’s $104.2 billion purchase of SABMiller would almost certainly require the company to sell off operations in the U.S. and maybe China, but Carlsberg, constrained by its finances, has no plans to go shopping for new businesses.
“Our focus is on organic growth and we have no clear intent to move into M&A,” Mr. Hart told reporters.
Source: Wall Street Journal
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