Annual Report 2013 Management Financial review statements 3 The Carlsberg Group at a glance 54 Consolidated financial statements 8 Letter from the Chairman 140 Parent Company 9 Statement from the CEO 160 Management statement 12 In the spotlight: Supply chain 161 Auditors’ report 13 Our regions 19 In the spotlight: China 20 Our business model and Strategy Wheel 21 KPIs 22 Strategy 28 CSR in the value chain 29 CSR targets 30 In the spotlight: Self-regulation 31 Risk management 35 In the spotlight: Sponsorships 36 Corporate governance 43 Remuneration report 49 Executive Committee 50 Shareholder information 52 Financial review 162 Supervisory Board DISCLAIMER This Annual Report contains forward-looking may contain the words “believe, anticipate, then current expectations or forecasts. Such actual results to differ materially from those distribution-related issues, information tech- not be possible for management to predict all statements, including statements about the expect, estimate, intend, plan, project, will be, information is subject to the risk that such expressed in its forward-looking statements nology failures, breach or unexpected termina- such risk factors, nor to assess the impact of Group’s sales, revenues, earnings, spending, will continue, will result, could, may, might”, expectations or forecasts, or the assumptions include, but are not limited to: economic and tion of contracts, price reductions resulting all such risk factors on the Group’s business or margins, cash flow, inventory, products, or any variations of such words or other words underlying such expectations or forecasts, may political uncertainty (including interest rates from market-driven price reductions, market the extent to which any individual risk factor, actions, plans, strategies, objectives and with similar meanings. Any such statements change. The Group assumes no obligation to and exchange rates), financial and regulatory acceptance of new products, changes in con- or combination of factors, may cause results guidance with respect to the Group’s future are subject to risks and uncertainties that update any such forward-looking statements developments, demand for the Group’s prod- sumer preferences, launches of rival products, to differ materially from those contained in operating results. Forward-looking statements could cause the Group’s actual results to to reflect actual results, changes in assump- ucts, increasing industry consolidation, com- stipulation of market value in the opening any forward-looking statement. Accordingly, include, without limitation, any statement that differ materially from the results discussed tions or changes in other factors affecting such petition from other breweries, the availability balance sheet of acquired entities, litigation, forward-looking statements should not be may predict, forecast, indicate or imply future in such forward-looking statements. Prospect- forward-looking statements. Some important and pricing of raw materials and packaging environmental issues and other unforeseen relied on as a prediction of actual results. results, performance or achievements, and ive information is based on management’s risk factors that could cause the Group’s materials, cost of energy, production- and factors. New risk factors can arise, and it may Editor Carlsberg Group Corporate Affairs Design and production Kontrapunkt Photos Nana Reimers Proofreading Borella projects Carlsberg Group Annual Report 2013 Management review CONTENTS 2 We are the fourth largest global brewer with leading Our longer-term financial positions in Western Europe, Eastern Europe and Asia. ambition is to deliver an average growth in adjusted Who we are earnings per share of more 75% 31% 500 than 10% p.a. 75% of our beer volumes 31% of volumes and We have 500 Adjusted EPS1 are sold in markets 45% of operating brands in our (DKK) where we have a number profit are generated global port folio 40 1 or 2 position. in developed markets. – a powerful combina tion 38 of local power 36 brands and 34 international 1 Adjusted for premium brands. 32 special items after tax. 30 2011 2012 2013 We drive organic revenue and earnings Carlsberg is our flagship brand Beer volumes growth by Western and one of the best-known beer Europe Eastern • Improving market shares and increasing net revenue per brands in the world. Europe hl through the roll-out of international premium brands Asia and innovations, accelerated portfolio optimisation and improved commercial execution. • Driving a focused efficiency agenda, including back- Our winning portfolio of high- end centralisation and standardisation of key processes across the value chain. quality beer brands includes our • Capturing emerging markets growth. international premium and Operating profit brands. local power Western Europe We target strong cash flow generation and Eastern increased return on capital employed by Europe We drive top-line growth through Asia • Growing operating profit. scalable and consumer-relevant • Improving operational and financial efficiency. • Improving working capital management. innovations. • Improving fixed asset utilisation. Carlsberg Group Annual Report 2013 Management review THE GroUP at A glance 3 Financial highlights Operational highlights • The Group delivered strong perform- ance and achieved market share 2013 results 119.7 66.6bn 2% growth in all three regions driven by focused commercial execution and Pro rata beer volume Organic net revenue Solid price/mix a number of successful innovations. of 119.7m hl. growth of 1%. of 2%. • Our Asian markets continued to grow In 2013, we delivered solid earnings growth while our Western European markets despite challenging and uncertain market declined by an estimated 2%. The conditions and we achieved market share Russian market declined by an esti- 9.8bn 3.0bn 5% mated 8% due to outlet restrictions growth in all three regions. and slower economic growth. Organic operating Free operating cash Adjusted net profit profit growth of 5%. flow of DKK 3.0bn. growth of 5%. • Tuborg grew 10% and was the fastest growing international premium beer brand in China and the largest pre- mium brand in India. EXPECTATIONS AND RESULTS 2013 Operating profit before special items Carlsberg’s share of adjusted net profit1 • The Carlsberg brand grew 6% in the 18.02.2013 Actual (Financial Statements for 2012) DKK 9,793m DKK 5,504m second half of 2013 in premium markets 18.02.2013 Financial Statements for 2012 Around DKK 10bn Mid-single-digit percentage increase (declined 2% for the full year, cycling 19.02.2014 Actual (Financial Statements for 2013) DKK 9,844m 5% (DKK 5,795m) last year’s EURO 2012 activations). 1 Reported net profit adjusted for special items after tax. • Our international cider brand, Somersby, grew 78%. MAIN ASSUMPTIONS UNDERLYING 2013 EARNINGS EXPECTATIONS February 2013 Actual • We kept a high level of investments Beer market dynamics for all three regions to be similar to 2012. Russian beer market development was worse than anticipated, across markets and functions to declining 8% (assumption adjusted during 2013). capture the short- and longer-term Beer volumes to be impacted by destocking in France and Russia in Q1 and stock Beer volumes were impacted as anticipated. earnings growth opportunities. building in Russia in Q4 ahead of the RUB 3 excise tax increase in January 2014. Reported cost of goods sold per hl expected to be flat. Reported cost of goods sold per hl declined slightly. • We strengthened our presence in Sales and marketing investments to revenue expected to be at the level of 2012. Sales and marketing investments to revenue were at the level of 2012. Asia, including increased ownership Costs of rolling out the integrated supply chain and business standardisation BSP1-related costs were DKK 350m. of Chongqing Brewery Group and project (BSP1) in Western Europe to impact Group profits by DKK 300-400m. construction of breweries. Average all-in cost of debt to decline by some 50-75bp. Average all-in cost of debt declined approximately 100bp. Tax rate expected to be 24-25%. Tax rate was 24.1%. • We established the Carlsberg Circular Capital expenditures expected to remain at the level of 2012. Capital expenditures were DKK 5.8bn (DKK 5.1bn in 2012) Community to rethink and redevelop (assumption updated in November). packaging with the aim of reducing Outlook based on an average EUR/RUB exchange rate of 42. Average EUR/RUB exchange rate was 42.2. the impact on the environment. Carlsberg Group Annual Report 2013 Management review THE GroUP at A glance 4 28.3m Our regions hl pro rata beer volume 1.9bn DKK – Asia operating profit WESTERN EUROPE ASIA Carlsberg is the second largest Carlsberg’s Asian portfolio of brewer in Western Europe. The businesses consists of mature region mainly comprises mature markets such as Malaysia, Hong markets mostly characterised by Kong and Singapore as well as well-established retail structures investments in growing beer and a strong tradition of beer markets such as China, India consumption. Beer consumption is and Vietnam. These markets generally flat or slightly declining. 42.4m offer considerable prospects for However, the uncertain macro- growth, underpinned by expand- environment of recent years has hl pro rata beer volume ing populations, rising disposable had a slightly negative impact on income levels, growing economies consumption and has also led to and relatively low per capita beer consumers shifting from on-trade consumption. The competitive in- to off-trade consumption.