Carlsberg to Cut 2,000 Jobs as Russian Beer Market Shrinks
Carlsberg plans to cut about 2,000 jobs as the world’s fourth-largest brewer seeks to reverse a profit decline caused by the weakness of Russia’s beer market.
The brewer aims to reduce annual costs by as much as 2 billion Danish kroner ($288 million) by 2018 and will cut management staff by 15 per cent, the Copenhagen-based maker of Kronenbourg said Wednesday.
Carlsberg also further reduced its profit outlook for the year. The stock rose as much as 8.7 per cent in Copenhagen, the steepest intraday gain in five years.
“We regard this new program as a step in the right direction,” said James Edwardes Jones, an analyst at RBC Europe.
The maker of Skol lager and Black Panther stout is reducing costs to compete with more profitable rivals such as AB InBev, which Wednesday formalised a $107 billion bid to buy SABMiller in the beer industry’s largest deal. Carlsberg dominates the Russian beer market, which shrank 11 percent in the third quarter as slumping oil prices and high inflation dented consumer spending. The brewer is also revamping businesses in the UK and China and will update investors on strategy in the first quarter of next year.
“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,” Cees ’t Hart, who became chief executive officer in June, said in the statement.
About 1,300 employees have already been notified of the job cuts, Carlsberg said. The company will take impairment and restructuring costs of 10 billion kroner from 2015 through 2017.
Carlsberg forecast a “high” single-digit percentage decline in full-year organic operating profit. The company said in August that earnings would fall “slightly,” abandoning previous guidance for the year.
“This is the second consecutive cut and increases the sense of uncertainty surrounding the company’s investment case,” said
The brewer gets almost 20 per cent of its profit from Russia, according to Sanford C. Bernstein estimates. The company plans to restructure operations there after closing two plants in January, cutting production capacity by 15 per cent. Carlsberg also said it’s cutting capacity in the UK and will reduce costs at its business in China.
Third-quarter earnings before interest, taxes and one-time items rose 2 per cent to 3.47 billion kroner. Analysts on average had estimated profit of 3.11 billion kroner. Sales advanced 3 per cent, excluding currency and acquisition effects.
Carlsberg is seeking a new chief financial officer after Joern P. Jensen retired after 15 years in September.
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