Overview of Carlsberg Brewery Malaysia

Carlsberg Brewery Malaysia (CAB MK), a key player in the beer manufacturing and distribution industry, operates through its renowned brands such as Carlsberg, Kronenbourg, Somersby, and Connor’s Stout Porter. Despite facing challenges in certain markets, the company has displayed resilience with a promising outlook for investors.

Performance Highlights for 2024

The company recorded a strong performance in 2024, with its core net profit standing at RM337.1 million, a 4.7% year-on-year (yoy) increase. This figure represents 99% of UOB Kay Hian’s full-year forecast and 97% of consensus predictions, indicating that the results were largely in line with expectations. Notably, revenue grew by 5.1% yoy to RM2,376.4 million.

Carlsberg’s Malaysian operations continued to shine, with revenue increasing by 8.8% yoy, reaching RM1,752.2 million. This growth was supported by a better Chinese New Year timing, which boosted sell-in volumes. However, marketing costs and challenges in Singapore offset some of the positive momentum.

The Singapore segment faced a 24.7% decline in earnings yoy, primarily due to the transition to the Sapporo brand and loss of Asahi sales. Revenue for Singapore remained flat at RM643.9 million, reflecting fierce competition and a challenging market environment.

Dividend Declaration

Carlsberg declared a final dividend of 35 sen per share for the fourth quarter of 2024, bringing the total dividend for the year to 100 sen, up from 93 sen in 2023. This reflects the company’s strong commitment to returning value to shareholders.

Key Financial Metrics

Carlsberg showcased impressive financial health, with key highlights including:

• Net Turnover: RM2,376 million in 2024, projected to grow to RM2,518 million in 2025.
• EBITDA: Increased from RM445 million in 2023 to RM474 million in 2024, with further growth expected in 2025.
• Core Net Profit Margin: Stable at 14.2% in 2024, projected to improve to 14.5% in 2025.
• Dividend Yield: Expected to grow from 5.0% in 2024 to 5.4% in 2025.

Market Share and Segment Performance

In Malaysia, Carlsberg gained a 2.7 percentage point market share, reaching 38.5% in 2024. The segment’s operating profit grew by 12.4% yoy due to stronger sales volume, an improved product mix, and a price hike earlier in the year.

Conversely, the Singapore segment struggled with a 42.9% yoy decline in earnings for the fourth quarter of 2024. The transition to Sapporo has proven to be challenging, as the brand only holds on-trade distributorship in Singapore, which previously accounted for two-thirds of Asahi sales.

Outlook for 2025 and Beyond

Carlsberg’s Malaysian operations are expected to remain robust in 2025, driven by stable raw material costs, a resilient supply chain, and strong sales volume. However, uncertainties around commodity prices and global trade tariffs pose potential risks.

The Singapore market is anticipated to face continued challenges in growing the Sapporo brand. Despite this, Carlsberg’s mainstream portfolio grew by 7% in 2024, supported by seasonal buying and effective marketing campaigns.

Investment Recommendation

UOB Kay Hian maintains a BUY recommendation for Carlsberg Brewery Malaysia, with a slightly revised target price of RM24.90 (from RM25.10), offering a 28.6% upside potential. The recommendation is based on a discounted cash flow (DCF) valuation, using a weighted average cost of capital (WACC) of 7.8% and a terminal growth rate of 3%. The stock’s dividend yields of 5.4% to 5.8% from 2025 to 2027 further enhance its appeal to investors.

Environmental, Social, and Governance (ESG) Initiatives

Carlsberg has made significant strides in its ESG efforts:

Environmental

• 50% reduction in water usage at breweries by 2030.
• Zero carbon emissions at breweries by 2030.
• 100% electricity from renewable sources at breweries by 2022, with zero coal usage.

Social

• 100% availability of alcohol-free brews.
• 100% responsible drinking messaging through packaging and brand activations.

Governance

• Board gender diversity: 71% male, 29% female.
• Management gender diversity: 67% female representation.

Conclusion

Carlsberg Brewery Malaysia continues to demonstrate resilience and adaptability in a challenging market environment. With strong growth in its Malaysian operations, promising dividend yields, and a focus on ESG initiatives, the company remains an attractive investment. However, challenges in Singapore and potential macroeconomic headwinds warrant close monitoring. Investors can look forward to a steady performance with opportunities for long-term gains.