Sales in First Quarter for Carlsberg Hit by Drop in China

Carlsberg A/S the Danish brewer said on Wednesday that sales had dropped more than was expected during its first quarter because of a drop in its China market as well as fluctuation in foreign exchange.

Sales were down 3% to just over 13 billion Danish crowns equal to $1.99 billion, which missed the estimates by analysts that averaged 13.18 billion crowns. The negative impact due to foreign exchange equaled 5%, said the brewer.

Sales across Asia, one of the primary growth regions for Carlsberg were down 0.7% to just over 3.5 billion crowns. Analysts were expected growth of over 2%.

In a prepared statement, Carlsberg said the development in the Asia beer market had been mixed with growth in markets like Nepal and India, while the market in China dropped by between 3% and 4%.

The Danish brewer said its sales volume expanded in Nepal and India and dropped in China due to closings of breweries.

Carlsberg’s sales across Asia were higher than those last year across Eastern Europe but the volume dropped in China. Carlsberg closed seven of its breweries in China as a way to focus on its stronger locations in the country.

One industry analyst said that Asia’s volume development had been weaker than was expected.

Carlsberg is the smallest brewer of the world’s four largest, but will soon be the No. 3 with the merger pending of  AB InBev and SABMiller, which are currently No. 1, 2 respectively, and Heineken NV, which is currently No. 3.

China is becoming more and more important for large international brands of beer as growth stalls elsewhere. The country has accounted for 50% of the global volume increase in the industry during 2015.

Snow is the top-selling beer in China with a share of the market of 30%. In March, AB InBev said it would be selling 49% of its stake of Snow to the China Resources Beer Holdings as part of its planned SABMiller takeover.

Since assuming the role one year ago as the CEO of Carlsberg Cees ‘t Hart launched a program of cost cutting and a new strategy to increase growth, which was subdued since its takeover of Baltika, the Russian brand in 2008.

The brewer based in Denmark, which did not release its profit for the first quarter, said it was expecting growth in operating profits for 2016 in the low single-digit numbers.

It also announced that was expected a negative impact from foreign exchange of over 550 million crowns during 2016, instead of the previous guidance of over 600 million.

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