European Shares Lower thanks to Carlsberg

Denmark’s Carlsberg A/S, the owner of the biggest brewer in Russia scrapped its goal of medium term profitability amid higher costs for brewing beer and expenses for changes made in logistics and product buying.

The target set in February of 2010 to increase the operating profit by 20% of sales over a three to five year period has proved to be difficult, the company, based in Copenhagen said on Monday.

The company statement added that a number of events, both within company control and beyond it, have and will impact margins on a continuing basis.

In trading in Copenhagen, Carlsberg dropped 7%, the most it has fallen in over six months. The brewer reported earnings for the fourth quarter that missed analyst’s projections.

Since the margin target was set by the brewer, the economy in Europe has plummeted into economic crisis, Russia also had introduce much stricter regulations on the sale of beer and costs of production have increased due to barley prices going up.

One analyst said he had expected Carlsberg to have low-ball guidance for this year, but it was even lower than expected. The brewer said it would now look to widen its western European operating margin by a minimum of 50 basis points each year for the next five years.

Earnings prior to taxes, interest and some items that were one-time increased to $385 million for the fourth quarter, but were slightly off what analysts had estimated.

Forty-four percent of the company’s earnings were from its unit in Eastern Europe, primarily in Russia, where taxes were increased by the government and regulations became stricter on the sale of alcoholic beverages. The company had 38% of the market in Russia during the fourth quarter.

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