Monday, November 25, 2013

Carlsberg ... A Single SpeedBump But Resume Growth In FY2014


Carlsberg Brewery Malaysia Bhd appears to have hit a speedbump in its quest for shareholder value and earnings growth recently with the release of its third quarter results for the financial year 2013 (FY2013) ending Dec 31.

The company had reported its third quarter net profit falling by 37% in the year-on-year period to RM38.44mil while revenues fell by a smaller measure of 14.3% to RM352.12mil.

Carlsberg attributed this fall in performance to several factors in Singapore which was the stock rationalisation that started in the second quarter and locally, to a trade stocking up a month earlier due to the delayed Budget 2014 announcement.

It would not be a like-to-like comparison to compare the third quarter of this financial year to the same quarter in the previous year because of this sole factor.

The company maintains that the “green label” brand is still strong in Malaysia despite the intense competition, both from licensed competitors and the unlicensed market as well. Despite the challenges from the unlicensed market, which some industry observers say could hinder further growth by the licensed operators, Carlsberg maintains it is upbeat on being the fastest growing beer company locally.

The drop in its net profit in the third quarter results was more of a single speedbump in the road ahead and remains upbeat that earnings growth would likely resume moving forward in FY2014.

It is optimistic about its future and the beer industry into FY2014. In FY2014 the industry would see several positive events taking place that could spur revenue.

There are also three other events that could help in market expansion and sales namely Visit Malaysia Year 2014, the World Cup in 2014 and the unveiling an exciting Chinese New Year campaign for its customers in Malaysia.

Other environment positives that could be looked forward to is the young populace locally that would see their spending power build up over the year moving forward.

Other factors to consider are a possible pick up in the country’s economy in the fourth quarter 2013 and the brand equity or loyalty that could see either one company growing most likely at the expense of the other amidst strong competitive pressures.

Going forward, the share price has already contracted since the middle of 2013 and long-term fundamentals are always there as this is a duopoly business. The near term hiccups have already been priced into the stock at present (21 Nov 2013). Unless its earnings come in even worse than expected in FY13, this contraction has already been priced in. Growth trajectory will be picking up once again in FY14.

Despite this, the beer industry in Malaysia continues remain challenging and has been affected by cautious consumer spending. Some critics however remain sceptical, noting that this could actually signal underlying weakness for industry growth such as already reaching a saturation point amidst a very competitive market.

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