Carlsberg - keep watching for the moment, but getting better

The last couple of write-ups on the Danish brewer Carlsberg have actually come to the same conclusion:

'Huge deja-vu for me looking at the Carlsberg results today.  The corporate results showed all the trends that we have been used to in European consumer goods companies this reporting season, no/low growth, positive price-mix and negative FX impacts...for an initial position DKK530 still works for me, next support after this at DKK500'

In share price terms we are not there yet...so will today's Q4/FY numbers take them there?

Well, the headlines were solid enough with positive price-mix and - even with FX factors ('negative currency impact has accelerated throughout the year') taken into account - positive operating leverage and hence rising operating profitability

 

What I liked about the numbers was the improving price-mix across all regions, but especially in Europe (West and East) and especially in Russia (6% in Q4, 1% only for the FY).  That's a good trend given the geographic importance of Eastern Europe to the company (as shown below). 

 

 

Specifically in Russia, I thought that the stabilisation in the numbers of kiosks and pavilions, post regulatory changes, is a good sign. 

The less good was on the cash flow side.  Not so much in the operating cash flows per se, but the free cash flows as noted below.  Some one-offs were apparent, but for all the stars to align they need to show some progress here

 

Specifically though for 2014 an organic 'high single-digit' increase suggests low single-digit on an FX adjusted reported basis.  Not so bad at all and backs up some of the positive price-mix / Russia stabilisation factors noted above.

 

Using the above guidance, the shares trade on x11.6 EV/ebit for FY14e with a 1.1% dividend yield (some progression was announced here but still a c. 20% payout ratio only).  The valuation is getting there and improvements are being seen...but the more compelling opportunity to buy remains at DKK530 and then DKK500 given general volatilities (the Russian rouble at a 5 year low today for example) and the slightly shabby cashflow generation recently. 

NB: shares open up 4%+ on the day.  Wait for volatility to embrace.