Danish beer-maker Carlsberg saw “strong recovery” of top-line and margins in India in H1 2021. Low vaccinations in select Asian markets are a concern leading to business uncertainties, but India “is a bit better” with plateaued infection rates.
The beer-maker’s top officials, in an earnings call, said the company’s India business “had another very volatile year” with “frequent changes in restrictions”.
Carlsberg saw a 40 per cent jump in India volume sales for the January-June period. Increase in sales of Tuborg and Carlsberg Smooth Draught beer and a low-base effect were cited as some of the reasons. Margins are “quite well” and “coming back strongly”. In the first half of last year, there was a “significant drop in volumes” and profits from India operations “were around zero”.
“India is a business with a high level of fixed costs. And hence, even small swings in the top line has a very severe impact on the bottom line. So the logic is that when volumes decline, our margins go down rapidly. And the opposite is the case when volumes are coming back and that's what we've seen this year: a strong recovery on top-line and the strong recovery of margins in India in the 2021 first half,” Heine Dalsgaard, CFO, Carlsberg said.
Asia business outlook
Following a “good first half” and a “good start to Q3”, the company upgraded its full guidance for organic operating profit growth to 8-11 per cent, up from the previous 5-10 per cent. The situation in Asia is “uncertain” in some markets like Laos, Vietnam, Cambodia and Malaysia due to the “low level of vaccinations”. The positive trajectory in China continued in July, but an increase in infections and lockdowns in recent weeks “brings some uncertainty” for the rest of the year. India, though, continues to be “a bit better”.
According to Cees ‘t Hart, CEO and President, Carlsberg, infection rates are “in decline” and off-trade and on-trade are “more or less open.”
“In India, we see the off-trade more or less open to 90-95 per cent, and 70 per cent in on-trade,” he said.
“In other countries of Asia, it's more concerning, especially because the vaccination rate is very low, in some cases, even below 10 per cent. So what we see in Laos, for example, is the lockdown of on-trade. And we see internal restrictions in Cambodia, there's an alcohol ban,” Hart added.
He said Vietnam is “really hit” by Covid and the restrictions in many provinces and major cities “reduced” sales of beer. While Malaysia had strict lockdown restrictions, its brewery there has just re-opened giving some hope. Easing is happening in Nepal.