ANNUAL
REPORT
2019
CARLSBERG GROUP ANNUAL REPORT 2019 TO OUR SHAREHOLDERS
2
MANAGEMENT
REVIEW
FINANCIAL
STATEMENTS
TO OUR SHAREHOLDERS
Letter from the Chairman
& the CEO ..................................................... 3
CONSOLIDATED FINANCIAL STATEMENTS
Statements ...........................................55
Notes ......................................................59
IN BRIEF
Strategic priorities ...................................... 5
Financial achievements ............................ 7
Our regions ................................................... 8
Our brands .................................................... 9
Key figures ................................................. 10
RESULTS AND EXPECTATIONS
Group ........................................................... 11
Western Europe ....................................... 13
Asia ............................................................... 16
Eastern Europe ......................................... 19
2020 earnings expectations ................ 21
CREATING VALUE
Purpose and ambition ........................... 22
Business model ........................................ 23
SAIL’22 in action ...................................... 24
SAIL’22 KPIs .............................................. 30
Capital allocation .................................... 31
Risk management ................................... 32
GOVERNANCE
Corporate governance ........................... 34
Remuneration report ............................. 41
Supervisory Board................................... 47
Executive Committee ............................. 50
Share information ................................... 52
Forward-looking statements ............. 53
PARENT COMPANY FINANCIAL
STATEMENTS
Statements ........................................ 123
Notes ................................................... 126
REPORTS
Management statement ................ 133
Auditor’s report ................................ 134
Win in craft & speciality
Front page: Our modern craft brewery
opened in 2018 in Klaipeda, Lithuania. In
addition to brewing a broad range of craft-
style beers under the Svyturys and Raudonu
Plytund (Red Brick) brands, the brewery
houses a gastrobar, shop and beer museum.
Since it opened, more than 120,000 people
have visited the brewery, which also hosts
music events and art performances. In July,
the brewery hosts the biggest Lithuanian
beer festival, Brewmaster’s Day, featuring
beer tastings, excursions, street-food stands,
music and stand-up comedy, and attracting
crowds of about 20,000.
carlsberggroup.com
@carlsberggroup
@carlsberggroup
Carlsberg Group
To our shareholders
LETTER FROM THE CHAIRMAN & THE CEO
A YEAR OF
GOOD PERFORMANCE
CARLSBERG GROUP ANNUAL REPORT 2019 TO OUR SHAREHOLDERS
3
2019 was a good year that saw
the highest ever cash returns to
shareholders.
Chairman Flemming Besenbacher
2019 was a year of good
performance, with organic
revenue growth, margin
expansion, strong cash flow
and a significant increase in
cash returns to shareholders.
The essence of our purpose is to
brew for a better today and
tomorrow. We are proud to be a
company with a purpose that reflects
our unique heritage and ambition for
the future.
Bringing our purpose to life through
the execution of SAIL’22 means that
we grow our business, create value
for our shareholders and make a
positive contribution to the societies
in which we operate. Read more
about our purpose on page 22.
We are pleased that we were able
to report progress on the financial,
strategic and organisational health
of the Carlsberg Group for 2019.
FINANCIAL HEALTH
Since the launch of SAIL’22 in early
2016, we have seen improved
financial performance, as evidenced
by organic top- and bottom-line
growth, strong cash flow, a healthy
balance sheet and reduced leverage.
This has enabled us to significantly
increase the cash returns to
shareholders.
Organic revenue grew by 3.2%, the
result of 3% price/mix and 0.1%
volume growth. These figures point
to our ability to premiumise our
portfolio by offering attractive and
desirable consumer propositions. The
top-line growth was achieved
despite lapping a very hot 2018
summer in Western Europe and
facing a difficult competitive situation
in Russia.
The positive top line, combined with
our continued focus on efficiencies
and costs, led to organic operating
profit growth of 10.5% and an
improvement of 100bp in our
operating margin. ROIC improved
from 8.1% to 8.8%.
Our financial results are discussed on
pages 11-12.
During the year, we adjusted our
earnings expectations twice. In
August, we increased the full-year
guidance from mid- to high-single-
digit percentage organic growth, and
in October we further increased this
to around 10%. The reasons for the
earnings adjustments were strong
results in Asia, particularly in China,
and solid Q3 figures in Western
Europe.
In 2019, we acquired the remaining
25% of Cambrew in Cambodia and
the remaining 1.2% of Carlsberg
Ukraine, giving us full ownership of
both these businesses. In addition,
we acquired a minority stake in the
Chinese craft brewery Jing-A
Brewing Co.
In line with our capital allocation
principles, we have invested in our
business, reduced leverage to well
below 2x net interest-bearing debt/
EBITDA and delivered on our
dividend policy of a payout ratio of
around 50%. Consequently, in
February 2019 we launched a 12-
month DKK 4.5bn share buy-back
programme.
The value of shares repurchased in
fiscal 2019 amounted to DKK 4.1bn.
Coupled with the dividend of DKK 18
per share paid in March, the total
cash amount returned to shareholders
during 2019 was DKK 6.8bn.
On 4 February 2020, we initiated a
new share buy-back programme of
DKK 5.0bn. Read more about the
share buy-back programmes on
page 31.
At the Annual General Meeting on
16 March 2020, the Supervisory
Board will propose a 17% increase in
the dividend to DKK 21 per share.
The Board will also propose that
4.4m treasury shares be cancelled.
STRATEGIC HEALTH
SAIL’22 continues to define our
strategic agenda, and we saw good
execution of our strategic priorities in
2019.
Enabled by the Funding the Journey
benefits, since 2016 we have
invested in and strengthened our
core beer business, increased the
attractiveness of our portfolio with
stronger craft & speciality brands
and alcohol-free brews, and
improved internal capabilities, for
example within supply chain, the
commercial area, innovation and
digital.
As shown on page 30, performance
in 2019 against our SAIL’22 KPIs
was positive. We saw volume growth
of 16% in craft & speciality and 7%
in alcohol-free brews. Gross brand
We are pleased to report that our winning
culture has taken solid root in our business.
CEO Cees ’t Hart
CARLSBERG GROUP ANNUAL REPORT 2019 TO OUR SHAREHOLDERS
4
contribution from core beer was
up 3%, and in Asia revenue grew
organically by 12.3% and operating
profit by 23.4%.
We contributed positively towards
the SAIL’22 financial KPIs of organic
operating profit growth, improved
ROIC and optimal capital allocation.
As part of our sustainability
programme, Together Towards
ZERO, we have set clear targets for
carbon, water, responsible drinking
and health & safety. During the year,
we made progress on all of these.
We are particularly pleased to report
that since 2015, we have reduced
carbon emissions at our breweries by
30%, with five of our sites now
carbon-neutral.
Our Sustainability Report contains
a wealth of data and a qualitative
overview of our achievements to
date and our future plans. In the
2019 report, we put special focus on
our many partnerships, which are
crucial for achieving our ambitious
targets. In this Annual Report, you
can find highlights of Together
Towards ZERO on pages 6 and
27-29.
ORGANISATIONAL HEALTH
We are pleased to report that our
winning culture has taken solid root
in our business. Important evidence
of this was provided by the
employee survey conducted in
2019, which showed improved
organisational health as well as
employee engagement and
satisfaction. The survey also
revealed a high level of commitment
to the triple A concept (alignment,
accountability, action), which guides
our behaviour and fosters a team-
based performance culture.
There has also been a significant
improvement in the quality and
capability of our leaders. This is seen
in a high level of internal recruitment
for vacant management positions at
all levels.
THANK YOU
We would like to thank our
shareholders for their support
and trust. We also want to thank
everyone in the Carlsberg Group for
their dedication, enthusiasm and
continued delivery towards a
successful SAIL’22.
Finally, we would like to acknowledge
the excellent relationships that we
have with our customers and
suppliers, and to express our
gratitude to our consumers around
the world.
Flemming
Besenbacher
Chairman
Cees
’t Hart
CEO
STRATEGIC PRIORITIES
ACCELERATING
TOGETHER
Our headline for 2019 was
“Accelerating Together” and by
that continue the execution of
SAIL’22, supporting organic top-
line growth of 3.2% and operating
profit growth of 10.5%.
GROWING
ALCOHOL-FREE
BREWS
VOLUME GROWTH
OF 7%
Our alcohol-free brews delivered solid volume
growth of 7%. In Western Europe, volumes
grew by 10%, supported by particularly strong
growth in markets such as Poland, Finland and
Sweden. In 2019, we introduced alcohol-free
brews on DraughtMaster, which will be an
important lever for growing sales of alcohol-
free brews in the on-trade.
STEPPING UP
ON DIGITAL
An important priority of SAIL’22 is to leverage
digital across our business. Our current focus is
on step-changing the quality of our interface with
our customers, especially in the on-trade, and
advanced analytics. On the first, examples include
rolling out our on-line ordering platform – Carl’s
Shop – digitalising DraughtMaster and developing
apps to enhance the business of our on-trade
customers. On analytics, we are starting to use
machine learning to improve demand forecasting,
customer analytics and equipment efficiency.
EXCEL IN EXECUTION
GROWING
IN ASIA
REVENUE GROWTH
OF 12.3%
Our Asian business had
another strong year, delivering
organic revenue growth of 12.3%.
This was the result of organic
volume growth of 6.0% and
price/mix of 6%. A strong driver
of the latter was our successful
premiumisation efforts,
evidenced by strong growth of
1664 Blanc and Tuborg as well
as premium offerings for our
local power brands.
CARLSBERG GROUP ANNUAL REPORT 2019 IN BRIEF
5
READ MORE
ABOUT OUR
STRATEGY
AND KPIs ON
PAGES 24-30
GROWING CRAFT
& SPECIALITY
VOLUME GROWTH
OF 16%
The growth of our craft &
speciality portfolio continued
in 2019. 1664 Blanc became our
largest brand in the category,
fuelled by very strong growth in
China, Russia, Ukraine, France,
Denmark and the Baltics. Our
local craft & speciality portfolio
includes exciting craft beer brands
such as Jacobsen in Denmark,
Nya Carnegie in Sweden and
Valaisanne in Switzerland.
WIN IN ALCOHOL-FREE BREWS
GROW IN ASIA
WIN IN CRAFT & SPECIALITY
STRATEGIC PRIORITIES
TOGETHER
TOWARDS ZERO
CARLSBERG GROUP ANNUAL REPORT 2019 IN BRIEF
6
We believe sustainability and profitability
can work together in harmony. Our aim
is to create sustainable value growth by
optimising the balance between our financial
performance and sustainability progress.
In 2019, we continued to make good progress
towards our ambitious targets for Together Towards
ZERO, which has clear priorities and ambitions within
the areas of carbon, water, responsible drinking and
health & safety.
SUSTAINABILITY
REPORT
2019
OUR SUSTAINABILITY
REPORT IS AVAILABLE AT
carlsberggroup.com/reports-
downloads/carlsberg-group-
2019-sustainability-report/
13%
reduction in relative
carbon emissions.
3%
reduction in relative
water usage.
99%
of our products
now carry responsible
drinking messages.
15%
reduction in lost-time
accident rate.
Our Sustainability Report is part of our annual reporting and provides details of Together
Towards ZERO, including our KPIs and progress towards our 2022 and 2030 targets. The
Sustainability Report carries an assurance statement by PwC on selected indicators. It serves as
our annual Communication on Progress to the United Nations Global Compact and is, as such,
our CSR disclosure in accordance with section 99a of the Danish Financial Statements Act.
FINANCIAL ACHIEVEMENTS
CONSISTENT
DELIVERY
CARLSBERG GROUP ANNUAL REPORT 2019 IN BRIEF
7
As part of our strategy, we
have clear KPIs for delivering
shareholder value: growing
operating profit organically,
improving return on invested
capital and ensuring optimal
capital allocation.
Our Golden Triangle is an
important KPI in our performance
management, where we
continuously seek to optimise
the balance between volumes,
gross profit after logistics margin,
operating profit growth and cash
generation.
The successful execution of our
SAIL’22 priorities has resulted in
consistent progress for operating
profit, return on invested capital and
capital allocation.
Read more about the Group’s results
in 2019 on pages 11-12 and in the
consolidated financial statements.
DELIVERING CONSISTENT ORGANIC
TOP- AND BOTTOM-LINE GROWTH
GENERATING STRONG CASH FLOW
AND IMPROVING RETURNS
ENSURING AN OPTIMAL CAPITAL
ALLOCATION
REVENUE AND ORGANIC GROWTH
CASH FLOW
NET INTEREST-BEARING DEBT (NIBD)
AND LEVERAGE
70
60
50
40
30
20
10%
8%
6%
4%
2%
0%
11
9
7
5
3
1
25
20
15
10
5
0
2017
2018
2019
2017
2018
2019
2017
2018
2019
Revenue
(DKKbn)
Organic growth
(%, rhs)
Free operating
cash flow (DKKbn)
Free cash flow
(DKKbn)
NIBD
(DKKbn)
NIBD/
EBITDA (rhs)
OPERATING PROFIT AND MARGIN
RETURN ON INVESTED CAPITAL (ROIC)
CASH RETURNS TO SHAREHOLDERS
12
10
8
6
4
2
17%
16%
15%
14%
13%
12%
25
20
15
10
5
0
7.5
6.0
4.5
3.0
1.5
0.0
1.5x
1.4x
1.3x
1.2x
1.1x
1.0x
70%
60%
50%
40%
30%
20%
2017
2018
2019
2017
2018
2019
2017
2018
2019
Operating profit
(DKKbn)
Operating margin
(%, rhs)
ROIC (%)
ROIC excl. goodwill (%)
Dividends
(DKKbn)
Share buy-back
(DKKbn)
Adj. payout
ratio (%, rhs)
OUR REGIONS
AN ATTRACTIVE
REGIONAL FOOTPRINT
During the past few years, we have
rebalanced our portfolio. Today,
we participate in large profit pools
and have a geographic exposure
encompassing 24 no. 1 or 2 positions
across Western Europe, Asia and
Eastern Europe. These markets
account for 73% of total volumes.
WESTERN EUROPE
55%
SHARE OF GROUP
REVENUE
51%
SHARE OF GROUP
OPERATING PROFIT
In the mature markets of Western Europe,
we will drive revenue growth through
premiumisation and pricing. We will improve
regional margins through revenue growth and
driving efficiencies and reducing costs.
CARLSBERG GROUP ANNUAL REPORT 2019 IN BRIEF
8
EASTERN EUROPE
17%
SHARE OF GROUP
REVENUE
16%
SHARE OF GROUP
OPERATING PROFIT
Our main markets in Eastern Europe are
Russia and Ukraine. In Russia, we aim to turn
around our business in response to a difficult
competitive environment.
ASIA
28%
SHARE OF GROUP
REVENUE
33%
SHARE OF GROUP
OPERATING PROFIT
Asia comprises very different markets. Our
ambition for the region is to grow revenue through
volumes as well as continued value growth through
expanding and growing our international brand
portfolio and premiumisation of local brands.
OUR BRANDS
AN ATTRACTIVE
BRAND PORTFOLIO
CARLSBERG GROUP ANNUAL REPORT 2019 IN BRIEF
9
Our core beer portfolio spans the international
beer brands Tuborg and Carlsberg and local power
brands. Alongside our core beer, we have great
craft & speciality beers and alcohol-free brews.
CORE BEER
GROWING CATEGORIES
93%
of own beer
volumes
86%
of own beer
revenue
7%
of own beer
volumes
14%
of own beer
revenue
INTERNATIONAL BRANDS
LOCAL POWER BRANDS
CRAFT & SPECIALITY
ALCOHOL-FREE BREWS
GOOD PROGRESS OF CORE BEER
Mainstream lager beer enjoys high penetration and frequency in most markets. Core beer is the
backbone of our business, representing our largest volume and profit pool. In addition to Carlsberg
and Tuborg, our core beer portfolio consists of strong local power brands such as Feldschlösschen
in Switzerland and Lvivske in Ukraine. In 2019, we saw particularly strong results for some of our
local Asian power brands, including Beerlao in Laos, which grew volumes by 10%.
GROWING CRAFT & SPECIALITY AND ALCOHOL-FREE BREWS
Important priorities of SAIL’22 are to strengthen our position within craft & speciality and
alcohol-free brews. The popularity of these categories is on the rise in many markets, driven
by consumers’ desire for premium brands with varied tastes and styles as well as the interest
in healthier lifestyles. Both categories offer superior margin opportunities, and in 2019 their
combined share of beer revenue increased from 13% to 14%.
REVITALISE CORE BEER
WIN IN CRAFT & SPECIALITY AND ALCOHOL-FREE BREWS
KEY FIGURES
FIVE-YEAR SUMMARY
CARLSBERG GROUP ANNUAL REPORT 2019 IN BRIEF
10
2019
2018¹
2017¹
2016¹
2015¹
2019
2018¹
2017¹
2016¹
2015¹
Volumes (million hl)
Beer
Non-beer
DKK million
Income statement
Revenue
Gross profit
EBITDA
Operating profit before special items
Special items, net
Financial items, net
Profit before tax
Income tax
Consolidated profit
112.5
22.4
112.3
20.8
107.1
19.2
116.9
21.9
120.3
21.5
65,902
62,503
60,655
62,614
65,354
30,208
31,419
13,583
8,876
-4,565
13,006
8,245
251
31,925
13,213
8,457
-8,659
-788
-1,247
-1,531
31,220
13,420
9,329
-88
-722
8,519
32,638
15,007
10,465
501
-738
10,228
-2,751
7,477
3,523
-2,386
-1,458
6,133
2,065
7,249
-2,392
4,857
371
4,486
3,881
-1,733
-849
-2,582
344
-2,926
4,292
Attributable to
Non-controlling interests
Shareholders in Carlsberg A/S (net profit)
Shareholders in Carlsberg A/S, adjusted²
908
6,569
6,160
824
5,309
5,359
806
1,259
4,925
Statement of financial position
Total assets
Invested capital
Invested capital excl. goodwill
Net interest-bearing debt (NIBD)
Equity, shareholders in Carlsberg A/S
43,448
45,302
46,930
50,811
123,120
117,700
114,251
126,906
124,901
86,219
33,311
31,792
18,776
17,313
82,721
84,488
96,089
33,991
19,638
43,225
25,503
94,950
44,680
30,945
43,489
Investments
Acquisition of property, plant and
equipment and intangible assets
Acquisition and disposal of
subsidiaries, net
Financial ratios
Gross margin
EBITDA margin
Operating margin
Effective tax rate
Return on invested capital (ROIC)
ROIC excl. goodwill
Equity ratio
NIBD/equity ratio
NIBD/EBITDA
Interest cover
Stock market ratios
Earnings per share (EPS)
Earnings per share,
adjusted (EPS-A)²
Free cash flow per share (FCFPS)
Dividend per share (proposed)
Payout ratio
Payout ratio, adjusted³
Share price (B shares)
Market capitalisation
-4,592
-4,027
-4,053
-3,840
-4,150
-
-974
268
1,969
-33
49.5
22.8
15.9
26.9
8.8
22.2
35.3
0.41
1.25
%
%
%
%
%
%
%
x
x
x
50.0
49.8
50.2
48.8
21.5
14.9
28.0
8.1
20.9
38.5
0.36
1.29
22.4
14.6
41.4
6.9
15.7
41.1
0.40
1.45
20.8
13.2
33.0
5.9
12.7
40.0
0.48
1.96
6.61
20.2
12.9
49.0
5.6
11.0
34.8
0.66
2.34
5.53
14.17
12.92
11.26
DKK
43.7
34.8
8.3
29.4
-19.2
DKK
DKK
DKK
%
%
41.0
65.9
21.0
49
50
35.2
40.2
18.0
52
51
32.3
56.9
16.0
194
50
25.4
56.5
10.0
34
39
28.1
49.2
9.0
n.m.
32
DKK
993.8
692.6
745.0
609.5
612.5
DKKm
145,805
104,830
112,116
92,896
93,977
Statement of cash flows
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
12,239
-2,277
9,962
12,047
-5,891
6,156
11,834
-3,154
8,680
9,329
-713
8,616
10,140
-2,618
7,522
Please refer to section 9.2 General Accounting Policies in the consolidated financial statements for a definition and
calculation of key figures and financial ratios.
Number of issued shares at year-end
Number of shares at year-end4
Average number of shares4
1,000
1,000
1,000
152,557
152,557
152,557
152,557
152,557
147,996
152,457
152,390
152,552
152,552
150,411
152,428
152,496
152,552
152,542
¹ Comparative figures for 2015-2018 and 2015-2016 have not been restated to include IFRS 16 and IFRS 15
respectively.
² Adjusted for special items after tax.
³ Proposed dividend on number of shares at year-end, excluding treasury shares, as a percentage of net profit adjusted
for special items after tax.
4 Excluding treasury shares.
Results and expectations
GROUP
A STRONG SET
OF RESULTS
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
11
2019 was a good year for the
Carlsberg Group. Continued
execution of our strategic
priorities supported top- and
bottom-line growth and
margin expansion.
For 2019, the Group defined three
overall financial priorities: drive
organic revenue growth, maintain
tight cost control and continue to
exercise strict cash discipline. Despite
tough comparables in Western and
Eastern Europe and an intensified
competitive environment in Russia,
the Group delivered well against
these priorities.
VOLUMES
Group beer volumes were 112.5m hl,
declining organically by 0.6%, with
growth in Asia offset by lower
volumes in Western and Eastern
Europe.
1.4%, positively impacted by the
increased ownership in Cambrew
from August 2018.
INCOME STATEMENT
Revenue was DKK 65.9bn. Organic
growth was 3.2%, due to the positive
3% price/mix. Price/mix was
supported by the growth of premium
products and our value management
initiatives, including price increases.
Reported revenue growth was 5.4%,
driven by a positive currency impact
and the Cambrew acquisition.
Gross profit was DKK 32.6bn.
Organic growth was 3%, with price/
mix more than compensating for the
3% organic increase in cost of sales
per hl. The reported gross margin
declined by 50bp to 49.5% as a result
of higher input costs, declining
volumes in Russia, due to the
challenging competitive environment,
and the consolidation of Cambrew.
Non-beer volumes were 22.4m hl,
growing organically by 3.9%.
Total organic volume growth was
0.1%, while reported growth was
Operating expenses excluding
distribution expenses declined
organically by 1%, thanks to
our continued focus on driving
efficiencies and maintaining tight
cost control. Excluding the higher
marketing expenses, operating
expenses declined organically by 2%.
Depreciation and amortisation
increased by DKK 0.5bn to DKK
4.5bn, primarily related to the
implementation of IFRS 16 “Leases”.
Operating profit before depreciation,
amortisation and impairment losses
(EBITDA) was DKK 15.0bn, up
organically by 10.0% and by 11.8% in
reported terms, positively impacted
by IFRS 16. Excluding the impact of
IFRS 16, organic growth would have
been around 7%.
Operating profit increased
organically by 10.5%, driven by
strong growth in Asia and Western
Europe, which more than offset the
decline in Eastern Europe. Reported
operating profit was DKK 10.5bn,
corresponding to 12.2% growth. The
reported operating margin improved
by 100bp to 15.9%.
Section 1 in the consolidated
financial statements contains more
details on operating activities and
section 9.3 information on the
implementation of IFRS 16.
Net special items (pre-tax) amounted
to DKK +0.5bn, positively impacted
by the gain from the sales of
former brewery sites in Norway
and Germany.
The brewery site in Hamburg,
Germany, was sold in 2016 in
connection with the commencement
of a new greenfield brewery outside
the city. The brewery site was
transferred to the buyer in November
2019, when the new brewery began
operating, and this was also when
the gain on the disposal was
recognised in special items. See
section 3.1 in the consolidated
financial statements for more details
on the sale of the Hamburg site.
Volume (million hl)
Beer
Non-beer
Total volume
DKK million
Revenue
Operating profit before special items
Operating margin (%)
2018
112.3
20.8
133.1
62,503
9,329
14.9
Organic
Acq., net
-0.6%
3.9%
0.1%
3.2%
10.5%
0.8%
4.1%
1.3%
1.0%
0.2%
Change
FX
-
-
-
1.2%
1.5%
Change
Reported
0.2%
8.0%
1.4%
2019
112.5
22.4
134.9
65,902
10,465
15.9
5.4%
12.2%
100bp
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
12
Partially offsetting these gains were
one-off restructuring measures in
Western and Eastern Europe and
provisions related to disposal of a
former brewery site in previous
years. For more information on
special items, see section 3.1 in the
consolidated financial statements.
Financial items, net, amounted to
DKK -738m. Excluding currency
gains and fair value adjustments,
financial items, net, amounted to
DKK -650m, down DKK 108m
from 2018, positively impacted by
lower average funding costs. A
specification of net financial items
is shown in section 4.1 of the
consolidated financial statements.
Tax totalled DKK -2.8bn and the
effective tax rate was 26.9%. Details
on tax are shown in section 6 of the
consolidated financial statements.
Adjusted net profit (adjusted for
special items after tax) was DKK
6.2bn, and adjusted earnings per
share (excluding treasury shares)
were DKK 41.0, up 16.5%. This was
driven by the strong operating profit
growth, a lower tax rate than in
2018, and supported by the share
buy-back. Reported net profit was
DKK 6.6bn compared to DKK 5.3bn
in 2018. In addition to the above, the
increase was due to positive special
items. Reported earnings per share
(excluding treasury shares) were
DKK 43.7.
STATEMENT OF FINANCIAL
POSITION
Total assets amounted to DKK
123.1bn at 31 December 2019. This
was an increase of DKK 5.4bn
compared with 2018 and mainly due
to currencies and the implementation
of IFRS 16.
Non-current assets amounted to
DKK 105.2bn, an increase of DKK
5.6bn compared with 31 December
2018. More information on
intangible assets and property, plant
and equipment is provided in section
2 of the consolidated financial
statements.
Total current assets amounted to
DKK 17.9bn. Details on current
assets are shown in section 1 of the
consolidated financial statements.
Equity amounted to DKK 46.0bn,
DKK 43.4bn of which was attributed
to shareholders in Carlsberg A/S and
DKK 2.6bn to non-controlling
interests. Changes in equity are
shown on page 57.
Long-term borrowings increased by
DKK 4.1bn compared with 31
December 2018 to DKK 20.9bn,
mainly due to the issuance of a 10-
year EUR 400m bond in July 2019
and the implementation of IFRS 16.
Short-term borrowings declined by
DKK 3.1bn to DKK 4.1bn, impacted
by the repayment of a EUR 750m
bond in July 2019, partly offset by
our ECP (European Commercial
Paper) programme, which is used for
short-term funding. Details on
equity and borrowings are shown in
section 4 of the consolidated
financial statements.
Other non-current liabilities
increased by DKK 2.9bn to DKK
9.1bn. Details on this development
are shown in section 5.3 of the
consolidated financial statements.
Current liabilities excluding short-
term borrowings increased by DKK
2.0bn to DKK 29.2bn, mainly
impacted by higher trade payables
and other liabilities. The former was
due to increased sales in Asia and
currencies, while the latter was
impacted by provisions related to
Cambrew, bonus accruals in Asia,
fair value adjustments and lower
accrued interest payable.
CASH FLOW
Free cash flow amounted to DKK
10.0bn versus DKK 6.2bn in 2018.
The increase of DKK 3.8bn was
mainly due to higher EBITDA,
proceeds from the sales of brewery
sites and a net positive inflow from
financial investments versus an
outflow of DKK 1.9bn in 2018.
The change in trade working capital
was DKK +0.5bn. Average trade
working capital to revenue was
-16.8%. The change in other working
capital was DKK +0.6bn, impacted
by provisions, VAT and other
accruals. Details on operating cash
flow are shown in section 1 of the
consolidated financial statements.
Cash flow from investing activities
was DKK -2.3bn against DKK
-5.9bn in 2018. Operational
investments of DKK -2.8bn were
positively impacted by the proceeds
from the sales of former brewery
sites in Norway and Germany. The
proceeds from the sale of the site in
Hamburg were recognised in
November 2019, when the brewery
site was transferred to the buyer.
Total financial investments amounted
to DKK +0.6bn (2018: DKK -1.9bn),
the negative amount in 2018 being
due to increased shareholdings in
Cambrew and Super Bock.
Cash flow from financing was
impacted by the share buy-back, the
acquisition of the remaining 25%
non-controlling interest in Cambrew
(see section 5.2 in the consolidated
financial statements for details) and
completion of the sale of the
brewery site in Hamburg.
RETURN ON INVESTED CAPITAL
Return on invested capital (ROIC)
increased by 70bp to 8.8%, driven by
improved profitability and a lower
effective tax rate. Invested capital
increased, mainly due to currencies
and the implementation of IFRS 16.
ROIC excluding goodwill increased
by 130bp to 22.2%.
FINANCING
Net interest-bearing debt was DKK
18.8bn. This was a net increase of
DKK 1.5bn compared with 2018,
impacted by the share buy-back
programme, the higher dividend
payout in 2019 and the
implementation of IFRS 16. Net
interest-bearing debt/EBITDA was
1.25x. More information is provided
in section 4.2 of the consolidated
financial statements.
SHARE BUY-BACKS
During the year, the Company
repurchased 4.5m shares at a total
purchase price of DKK 4.1bn as part
of a 12-month DKK 4.5bn buy-back
programme, which commenced on 6
February 2019 and terminated on 30
January 2020.
On 4 February 2020, the Company
initiated a new 12-month share
buy-back programme. Under the
programme, the Company intends to
buy back shares amounting to DKK
5.0bn, split into two tranches of six
months each. Read more about the
share buy-back programmes on
page 31.
WESTERN EUROPE
GROWING TOP AND
BOTTOM LINE
Western Europe delivered
solid results despite tough
comparables. Top-line growth
was due to positive price/mix,
while the improved operating
margin was also supported by
continued focus on costs and
efficiencies.
Western Europe is our largest region,
accounting for approximately half of
our operating profit. We are the
second largest brewer in the region,
with a particularly strong presence in
the central and northern parts, where
we hold no. 1 and 2 positions in
several markets.
In the Nordic markets, we are mainly
competing against local or regional
players. Elsewhere, we are in
competition with large global
players.
Our Western Europe region also
includes our global export and
licence business.
REGIONAL RESULTS
Our Western Europe business
delivered solid results despite tough
comparables from the warm summer
in 2018.
Revenue grew organically by 0.3% as
a result of +1% price/mix and 0.8%
organic volume decline. Reported
revenue grew by 0.5%, due to a
small positive currency impact.
Price/mix was positive in most
markets thanks to successful
premiumisation efforts and value
management initiatives, including
price increases.
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
13
Volume (million hl)
2018
Organic
Acq., net
FX
2019
Reported
Change
Change
Beer
Non-beer
Total volume
DKK million
Revenue
Operating profit before special items
Operating margin (%)
47.3
15.1
62.4
36,151
5,425
15.0
-1.6%
1.7%
-0.8%
0.3%
12.8%
0.0%
0.0%
0.0%
0.0%
1.2%
-
-
-
46.6
15.3
61.9
0.2%
0.0%
36,317
6,187
17.0
-1.6%
1.7%
-0.8%
0.5%
14.0%
200bp
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
14
Operating profit grew organically by
12.8%, and the operating margin
improved by 200bp to 17.0%. This
improvement was driven by
premiumisation, value management
and lower operating expenses, in
particular administrative expenses.
Reported operating profit grew by
14.0%, reflecting the increased
ownership of Super Bock.
The total organic volume decline was
mainly the result of the tough
comparables.
Non-beer volumes grew by 1.7%,
due to solid performance of the soft
drinks businesses in the Nordic
markets.
Price/mix improved, mainly as a
result of price increases.
THE NORDICS
Despite tough comparables from the
warm summer in 2018, the Danish
business had a good year, the key
drivers being market-share gain in
beer and a growing soft drinks
category. Our core beer brands and
craft & speciality beers, such as
Grimbergen and 1664 Blanc,
delivered very positive results.
Our Swedish business delivered solid
performance, with overall flat market
shares. Total volumes declined
slightly due to lower beer volumes,
while non-beer volumes grew.
In Norway, volumes declined slightly
due to bad weather in Q2 and the
loss of certain third-party beer
brands. The Tuborg brand and the
soft drinks business delivered
particularly good growth. The roll-
out of DraughtMaster progressed
very well, supporting favourable
value growth in the on-trade.
In Finland, our business delivered
solid volume growth, supported by
our listing for a major retailer’s
summer campaign. This also meant
that our beer market share
strengthened considerably, while
price/mix declined. Our craft &
speciality brands and alcohol-free
brews delivered strong growth.
FRANCE
In a slightly growing French market,
we saw growth in our premium
brands, while total volumes were
impacted by lower volumes of the
mainstream Kronenbourg brand and
a lower level of promos from our
side due to bottle shortage issues.
Price/mix continued to improve,
driven by favourable brand mix.
volumes declined slightly due to
tough comparables from the warm
summer in 2018 and the loss of
certain third-party brands.
POLAND
In Poland, we achieved mid-single-
digit price/mix, mainly driven by
favourable mix due to good results
for our upper-mainstream brands,
such as Zatecky and Okocim, craft &
speciality brands, alcohol-free brews
and Somersby. Our volumes declined
in line with the market.
SWITZERLAND
Our Swiss business delivered a solid
set of results. Our portfolios of craft
& speciality and alcohol-free brews
all performed well, while total
THE UK
A key focus in 2019 was the
relaunch of the Carlsberg brand.
During the year, price/mix showed
good progress and our market share
TOTAL VOLUME (m hl)
REVENUE (DKKbn)
OPERATING PROFIT (DKKbn)
OPERATING MARGIN
68
64
60
56
52
48
37
36
35
34
33
32
7
6
5
4
3
2
20%
18%
16%
14%
12%
10%
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
15
improved compared with the exit
level of 2018. Volumes declined by
high-single-digit percentages,
impacted by tough comparables,
lower volumes of Carlsberg Pilsner
due to the higher pricing of the
brand, and decline of the Carlsberg
Export line extension.
OTHER MARKETS
In the other Western Europe
markets, we achieved particularly
strong top-line and operating profit
improvement in markets such as
Bulgaria, Serbia, Greece, Germany
and the Baltics, where good growth
of Carlsberg, Tuborg, craft &
speciality and alcohol-free brews
supported a positive price/mix
development.
Our markets in Western Europe
Consumption characteristics
Our position
Our
operations
LAUNCHING
BROOKLYN SPECIAL
EFFECTS
Brooklyn Special Effects is an alcohol-free
hoppy lager with a zesty, dry hop aroma and
pleasantly bitter finish. This great beer was
developed in Sweden in a collaboration
between Carlsberg and Brooklyn. It was first
launched in late 2018 in Sweden, where the
consumer response was very positive, and
during 2019 distribution grew rapidly, with the
brand now available in more than 1,000 on-
trade outlets. In 2019, we launched Brooklyn
Special Effects in Norway, Finland, Italy and
the UK, and more markets will launch in 2020.
The expansion of DraughtMaster into alcohol-
free brews will further support the on-trade
growth of this – and other – alcohol-free brews.
Market
position (no.)
Market
share (%)
Breweries¹
WIN IN ALCOHOL-FREE BREWS
Markets
Denmark
Sweden
Norway
Finland
Poland
France
Per capita
beer
consumption
(litres)
On-trade
share of
market,
approx. (%)
58
48
47
74
100
33
21
21
20
14
11
28
1
1
1
1
3
2
54
31
51
45
18
27
South East Europe
37-80
26-59
1-3
15-37
Switzerland
UK
Germany
Italy
The Baltics
Portugal
56
64
99
25
52-76
52
35
45
17
38
4-8
64
1
4
1²
4
1-2
1
40
9
16²
6
27-39
46
¹ Breweries with capacity above 100,000 hl. ² Northern Germany.
Source: GlobalData, Carlsberg estimates.
1
1
1
1
3
1
6
1
1
2
1
2
1
ASIA
A YEAR OF
STRONG RESULTS
Asia had another year of
strong top- and bottom-
line growth, supported
by both volume growth and
healthy price/mix and with
particularly strong results in
China.
The importance of Asia for the Group
has increased significantly over the
past decade, during which we have
expanded our presence in the region
organically and through acquisitions.
Today, we have an attractive overall
position, with no. 1 and 2 positions
in six markets, and in 2019 China
became the Group’s largest market in
terms of volume, revenue and
operating profit.
The competitive landscape varies
significantly between markets, with
global players and local brewers
both present.
SAIL’22 specifically targets Asia as a
key contributor to the Group’s top-
and bottom-line growth, with
premiumisation a key element,
driven by both our international
brands and premiumising of our local
power brands.
Consequently, a significant proportion
of our SAIL’22 investments has been
allocated to the region.
REGIONAL RESULTS
The Asia region had a good year,
delivering very strong results.
Revenue grew organically by 12.3%,
driven by 6.0% organic volume
growth and +6% price/mix. Reported
revenue grew by 18.6% due to a
positive currency impact from all
countries in the region and the
acquisition of Cambrew in 2018.
The solid price/mix improvement
was a combination of strong growth
in our international premium brands,
successful premiumisation for some
of our local power brands and price
increases. Our Chinese business was
a key contributor to the strong
price/mix.
Organic operating profit grew
strongly by 23.4% as a result of the
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
16
Volume (million hl)
Beer
Non-beer
Total volume
DKK million
Revenue
Operating profit before special items
Operating margin (%)
2018
34.4
3.6
38.0
Organic
Acq., net
5.6%
10.3%
6.0%
2.6%
23.5%
4.7%
Change
FX
-
-
-
Change
Reported
8.2%
33.8%
10.7%
2019
37.2
4.8
42.0
15,530
3,164
20.4
12.3%
23.4%
4.0%
-1.6%
2.3%
2.5%
18,416
3,931
21.3
18.6%
24.3%
90bp
strong revenue growth and tight cost
control. Reported operating profit
growth was slightly higher, at 24.3%,
due to a positive currency impact,
which more than offset the impact
from the consolidation of the loss-
making Cambrew. The operating
margin improved by 90bp to 21.3%.
As expected, and despite the positive
impact in H2 from the reversal of a
pension obligation at Chongqing of
DKK 162m, the 20.5% operating
margin in H2 was lower than the
22.1% in H1 due to higher marketing
investments, particularly in China,
market decline in Nepal and the
rebuilding of the Cambrew business.
Organic volume growth was mainly
driven by strong growth in China,
Vietnam, Laos and Malaysia. The
non-beer business in Laos and
Cambodia did particularly well,
resulting in organic volume growth of
10.3%. Reported total volumes grew
by 10.7% due to the consolidation of
Cambodia.
CHINA
Our Chinese business continued to
deliver strong performance. Despite
a slightly declining market, our
volumes grew organically by 8% and
revenue by 19%. The volume growth
was attributable to several factors.
Firstly, we saw 7% growth in our
premium portfolio, which continues
to benefit from the ongoing
premiumisation trend in the market.
1664 Blanc in particular performed
very well, growing by almost 50%.
Secondly, the expansion outside our
western regional footprint into big
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
17
+45%
WUSU VOLUME GROWTH
Celebrating Wusu’s 30th anniversary in 2016,
we relaunched the brand with a new range of
beers, new packaging and new communication.
In 2017, we took the brand to the next level
with a range of premium innovations, such as
wheat and pure draft. For many Chinese
consumers, Wusu is considered a masculine
brand with a rich taste. This image has
successfully driven the growth of the brand,
supported by our big city expansion in China,
e-commerce and, not least, social media and
word-of-mouth. Double the price of
mainstream beer, sales of the premium Wusu
Red supported our strong price/mix in China.
GROW IN ASIA
TOTAL VOLUME (m hl)
REVENUE (DKKbn)
OPERATING PROFIT (DKKbn)
OPERATING MARGIN
50
44
38
32
26
20
20
16
12
8
4
0
5
4
3
2
1
0
25%
23%
21%
19%
17%
15%
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
cities further east showed good
progress. Thirdly, some of our local
power brands achieved strong
growth, with Wusu and Dali growing
by 45% and 11% respectively.
Price/mix of +10% was the result of
premiumisation and value
management, including price
increases, supported by lower VAT.
INDIA AND NEPAL
Revenue growth in India was high-
single-digit, supported by price
increases and lower rebates. Our
business started 2019 very well but
deteriorated during the year, and our
volumes grew modestly by 1%. There
were several factors in the weakness
in H2, and especially in Q4, including
changed excise duties and regulation
in a few states.
Our business in Nepal had a
challenging year, due to weakening
consumer sentiment, leading to a
high-single-digit beer market
decline, and an import ban on
energy drinks, which affected our
local Red Bull distribution business.
As a result, revenue and profit
declined.
LAOS, CAMBODIA AND VIETNAM
In Laos, the positive momentum for
our business continued. We achieved
solid volume growth for all
categories – beer, water and soft
drinks. Price/mix strengthened due
to positive mix within the beer
category, which more than offset the
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
18
negative category mix from the
growth of water and soft drinks.
In a growing Vietnamese market, our
business delivered double-digit
volume growth. Our local power
brand Huda and the line extension
Huda Ice Blast were key growth
drivers. Price/mix improved, mainly
due to price increases and supported
by brand mix from growth of the
Carlsberg brand.
In Cambodia, we continued the task
of rebuilding the business, including
the significant task of strengthening
processes and compliance, building
capabilities, strengthening route-to-
market etc. In H2, the key task was
the relaunch of the iconic Angkor
brand with a new campaign and a
changed structure for consumer
promotions. The latter proved
unsuccessful, and total volumes in
Q4 dropped by around 25%.
Consequently, it is now being
changed.
MALAYSIA AND SINGAPORE
In Malaysia and Singapore, our
businesses delivered solid
performance, with good results for
our premium offerings, such as 1664
Blanc and Somersby.
+11%
HUDA VOLUME GROWTH
Our markets in Asia
Huda, our local power brand from Hue in the
central part of Vietnam, has been a symbol of
the Vietnamese heartland for more than 25
years. In 2018, we launched Huda Ice – a
premium variant of the brand – with the tag
line “Extremely Cold – Extremely Refreshing”.
Huda Ice matures at -1°C and is brewed with
three unique varieties of hops to preserve the
finest flavour and aroma. First sold only in
bottles, in 2019 we introduced Huda Ice Blast
in cans. This added further positive momentum
to the brand, quadrupling volumes versus
2018. Huda Ice Blast was a significant
contributor to the brand volume growth in 2019.
GROW IN ASIA
Consumption characteristics
Our position
Our
operations
Per capita
beer
consumption
(litres)
On-trade
share
of market,
approx. (%)
26
48
2
43
63
6
4
9
21
21
45
53
17
40
30
46
71
47
61
40
Market
position (no.)
Market
share (%)
Breweries¹
5/1²
7/63²
25
1
3
4
4
2
1
4
2
1
96
19
8
11
45
64
8
23
29
2
8
1
1
1
1
1
-
-
Markets
China
Laos
India
Vietnam
Cambodia
Malaysia
Nepal
Myanmar
Singapore
Hong Kong
¹ Breweries with capacity above 100,000 hl. ² Total China/western China.
Source: GlobalData, Carlsberg estimates.
EASTERN EUROPE
CHALLENGING
YEAR
Our Eastern Europe region had
a challenging year, mainly due
to a difficult competitive
environment in Russia, which
negatively impacted volumes.
All markets except Russia
delivered strong organic
growth in operating profit.
Eastern Europe is our smallest
region, accounting for 16% only of
operating profit. Our two main
markets in the region are Russia
and Ukraine, accounting for
approximately 65% and 20%
respectively of regional volumes.
We have number 1 or 2 positions in
all markets in Eastern Europe. In
Russia and Ukraine, the competitive
environment is split between a strong
presence of global players and a
large number of small, local brewers.
REGIONAL RESULTS
Our Eastern Europe business had a
challenging year because of changes
in the competitive environment and
retail landscape. Revenue declined
organically by 0.4%, with price/mix
of 5% offset by the total volume
decline of 5.2%.
The price/mix improvement was
driven by price increases in all
markets and mix improvements from
growth of premium products, craft &
speciality and alcohol-free brews.
Operating profit declined organically
by 17.9%. All markets but Russia
delivered solid operating profit
growth. Profits in our Russian
business were impacted by lower
volumes (particularly in H2), input
cost inflation, a negative transaction
impact (mainly on certain packaging
materials) and higher marketing
costs. Reported operating profit was
impacted by a small positive
currency impact. The operating
margin was 17.0%.
Beer volumes declined organically by
6.2% due to tough comparables, as
2018 was positively impacted by
warm weather and the football
World Cup in Russia, as well as
market share losses, especially in
Russia. Non-beer volumes grew
Volume (million hl)
Beer
Non-beer
Total volume
DKK million
Revenue
Operating profit before special items
Operating margin (%)
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
19
Organic
Acq., net
2018
30.6
2.1
32.7
-6.2%
9.6%
-5.2%
10,780
2,222
20.6
-0.4%
-17.9%
Change
FX
-
-
-
Change
Reported
-6.2%
9.6%
-5.2%
2019
28.7
2.3
31.0
3.3%
2.6%
11,097
1,882
2.9%
-15.3%
17.0
-360bp
0.0%
0.0%
0.0%
0.0%
0.0%
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
20
Our markets in Eastern Europe
Market
Russia
Ukraine
Belarus
Kazakhstan
Azerbaijan
Consumption characteristics
Our position
Our
operations
Per capita
beer
consumption
(litres)
On-trade
share
of market,
approx. (%)
56
42
52
32
6
19
12
5
8
39
Market
position (no.)
Market
share (%)
Breweries¹
2
2
1
1
1
27
31
29
37
61
8
3
1
1
1
¹ Breweries with capacity above 100,000 hl.
Source: GlobalData, Carlsberg estimates.
strongly by 9.6%, due to growth of
energy drinks in several markets.
RUSSIA
The Russian market enjoyed low-
single-digit growth. The competitive
environment was very challenging
throughout the year, and as a result
we lost market share.
Price/mix was positive at 3%, while
total volumes were down by 8%,
resulting in an organic revenue
decline of 5%. The positive price/mix
was driven by price increases in late
2018 and early 2019, mix
improvements from growth of craft
& speciality and low presence of
low-priced offerings in certain key
accounts for most of the year.
UKRAINE
Our Ukrainian business delivered
high-single-digit percentage organic
revenue growth, driven by double-
digit price/mix, which compensated
for lower volumes. The strong
price/mix was the result of price
increases and a positive brand mix,
supported by strong growth of
premium offerings, such as 1664
Blanc and Somersby.
OTHER MARKETS
Our businesses in Belarus and
Kazakhstan delivered solid
performance, improving revenue,
earnings and market shares. Our
business in Kazakhstan did
particularly well. The market was
growing, and we grew well ahead of
the market, with improvements in all
segments, particularly in craft &
speciality and alcohol-free brews.
TOTAL VOLUME (m hl)
REVENUE (DKKbn)
OPERATING PROFIT (DKKbn)
OPERATING MARGIN
35
31
27
23
19
15
15
12
9
6
3
0
2.5
2.0
1.5
1.0
0.5
0.0
25%
20%
15%
10%
5%
0%
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
CARLSBERG GROUP ANNUAL REPORT 2019 RESULTS AND EXPECTATIONS
21
2020 EARNINGS EXPECTATIONS
EARNINGS
EXPECTATIONS
For 2020, we will continue to
drive organic revenue and
operating profit growth.
We will do this by executing our
SAIL’22 priorities, including the
growth priorities of craft & speciality,
alcohol-free brews and Asia, in
addition to our Funding the Journey
culture with its strict cost control and
cash discipline.
Based on this, the Group expects to
deliver:
• Mid-single-digit percentage
organic growth in operating profit.
As previously communicated, we will
no longer sell soft drinks at the
German/Danish border and we are
experiencing a continued difficult
competitive environment in Russia.
At the same time, we are facing a
more volatile business environment
including the current coronavirus
outbreak in China, of which the full
impact is not yet known.
Based on the spot rates at 3
February, we assume a translation
impact of around DKK +50m for
2020.
Other relevant assumptions are:
• Financial expenses, excluding
currency losses or gains, are
expected to be around DKK 600-
650m.
• The reported effective tax rate is
expected to be 26-27%.
• Capital expenditure at constant
currencies is expected to be around
DKK 5bn.
FORWARD-LOOKING
STATEMENTS
This Annual Report contains
forward-looking statements. Any
such statements are subject to risks
and uncertainties that could cause
the Group’s actual results to differ
materially from the results discussed
in such forward-looking statements.
Accordingly, forward-looking
statements should not be relied on as
a prediction of actual results. Please
see page 53 for the full forward-
looking statements notice.
ALL RED
FOR THE MIGHTY REDS
Teams wearing red win more. That was the
view of legendary Liverpool FC manager Bill
Shankly when he swapped his team's white
shorts and socks for red ones – a choice that
preceded the club's most successful ever
period and has stood ever since. To celebrate
this historic move and Carlsberg’s relation-
ship with Liverpool FC spanning 26 seasons,
our brewmasters brewed an all-red beer
especially for Liverpool FC fans. The limited-
edition pilsner got its distinctive colour from a
barley variety that is naturally red – curated
by barley experts at the Carlsberg Research
Laboratory. We successfully leveraged the
hyped Red Barley campaign in ten markets,
including Asian markets such as China,
Nepal, Vietnam and Malaysia.
STRENGTHEN THE CORE
Creating value
PURPOSE AND AMBITION
WE ARE BREWING FOR
A BETTER TODAY AND TOMORROW
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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We pursue perfection every
day. We strive to brew better
beers. Beers that stand at the
heart of moments that bring
people together. We do not
settle for immediate gain when
we can create a better
tomorrow for all of us.
Our purpose is rooted in our heritage
and the mentality of our founders,
who left a rich legacy that still
greatly influences how we run our
business today. Their pioneering
spirit, passion for brewing and
proactive contribution to society are
what make us who we are today.
We live our purpose every day by
focusing on our brands and the art of
brewing, exciting our consumers with
quality brews that strengthen our
identity and pride as brewers, and by
continuously aiming to do better.
Being a purpose-driven organisation
has an impact across the Group,
mobilising our people and spurring
individual engagement.
Living our purpose is key for our
ability to successfully execute
SAIL’22 and for achieving our
ambition of being successful,
professional and attractive in the
markets in which we operate:
Successful by achieving a
sustainable balance of the Golden
Triangle by improving long-term
volumes, margins and earnings.
Professional by being the preferred
supplier for our customers.
Attractive by creating value for our
shareholders, a great working
environment and high-performance
culture for our employees and being
a responsible and sustainable
corporate citizen for society at
large.
Our ambition and strategy are
decisive for our business model,
which has clear priorities on
markets, portfolio, customers,
supply chain and sustainability.
BUSINESS MODEL
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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OUR BUSINESS MODEL
ROOTED IN OUR PURPOSE
Our business model is rooted in our purpose and ambition. It
takes its starting point in our focus on our brands and the art
of brewing, how we excite our consumers with quality brews
and our continuous striving to do better.
WE FOCUS ON THE MARKETS
WHERE WE HAVE A NO. 1 OR 2
POSITION...
… WHERE WE DELIVER AN
ATTRACTIVE BEER PORTFOLIO FOR
ALL CONSUMER SITUATIONS...
… AND STRIVE TO EXCEL
IN OUR SERVICE TO ON- AND
OFF-TRADE CUSTOMERS...
... BY OPTIMISING OUR
SUPPLY CHAIN AND IMPROVING
PROCESSES AND SYSTEMS.
Core beer is a volume business, and strong
market positions are key drivers of profitability.
We have particular focus on the 24 markets
in Western Europe, Asia and Eastern Europe
where we are no. 1 or 2.
The strength of our beer portfolio lies in the
strong local roots of our local power brands,
combined with our excellent craft & speciality
brands, alcohol-free brews and international
beer brands.
Our customers range from on-trade to off-
trade, from big to small. We aim to become
their preferred beer supplier, providing
products and services that deliver value
growth for them and us.
By living our Funding the Journey culture,
we have a continual focus on optimising our
integrated, end-to-end supply chain and
driving operating cost efficiencies.
BREWING FOR A BETTER
TODAY AND TOMORROW
In all our markets, we aim to lead in
sustainability because it is central to our purpose
and because we genuinely believe it is the right
thing to do – delivering tangible benefits for our
business and for society as a whole.
BREWING FOR A BETTER
TODAY AND TOMORROW
Our brands offer us powerful opportunities for
communicating with consumers. We use these
opportunities to encourage moderate, responsible
consumption of our products. We also increase
the availability of alcohol-free brews.
BREWING FOR A BETTER
TODAY AND TOMORROW
We add value to our on-trade customers through
DraughtMaster and by developing digital solutions
and services that allow them to improve their
business. We also develop sustainable packaging
solutions such as Snap Pack.
BREWING FOR A BETTER
TODAY AND TOMORROW
Recognising the need for strong actions in the
face of complex sustainability challenges, our
sustainability programme Together Towards
ZERO sets clear and ambitious targets for
carbon emissions and water usage.
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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IN ACTION
DELIVERING THROUGH
OUR STRATEGY
On the following pages, we highlight
examples of how SAIL’22 came alive
during the year.
A further description of the SAIL’22
priorities can be found in the 2016
Annual Report, available online on
www.carlsberggroup.com.
SAIL’22 continues to guide our
actions, setting clear priorities
for how we brew a better
today and tomorrow.
The headline for 2019 was
“Accelerating Together”, and we
saw continued positive momentum
for our strategic priorities. This was
evidenced by consistent delivery
against our SAIL’22 KPIs and
financial ambitions, as shown on
pages 29-30.
STRENGTHEN
THE CORE
Leverage our strongholds
Excel in execution
Funding the Journey culture
POSITION
FOR GROWTH
Grow craft & speciality
Win in alcohol-free brews
Grow in Asia
CREATE A
WINNING CULTURE
Team-based performance
Together Towards ZERO
Live by our Compass
DELIVER VALUE FOR
SHAREHOLDERS AND SOCIETY
Organic growth in operating profit
ROIC improvement
Optimal capital allocation
LEVERAGE OUR
STRONGHOLDS
ACCESSIBLE
CRAFT DRIVING
GROWTH
Dating back to 1859, our local
power brand Frydenlund is the
oldest registered trademark in
Norway and a symbol of quality.
Faced with the challenge of craft
& speciality market growth at the
expense of mainstream lager, in
2010 we relaunched the brand with
new, distinctive graphics and visual
identity. In recent years, we have
developed the brand further with
a number of crafty line extensions,
such as Pale Ale, IPA and Wit. These
initiatives have strengthened the
perception of craftsmanship and
helped consumers bridge from
lager to craft. Offering accessible
crafty brews, in the past decade
Frydenlund has been the fastest
growing beer brand in Norway and
has a value share of 7%.
IN ACTION
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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FUNDING THE
JOURNEY CULTURE
A LIFESTYLE,
NOT A DIET
When we launched the efficiency
and cost programme Funding
the Journey (FtJ) in 2015, we had
two purposes: to invest in our
business in support of the SAIL’22
priorities and to improve operating
profit. FtJ as a programme ended
in 2018, but the culture and
mindset continue. Our FtJ culture
is being embedded in our daily
work within areas such as value
management and supply chain,
operating cost and commercial
spend efficiency. Important levers
include digitalisation, further
standardisation and automation
of processes, and increased use
of shared services. By embedding
the FtJ culture, we will continue to
support growth investments and
margin improvement.
LEVERAGE OUR
STRONGHOLDS
OPENING
FLAGSHIP BARS
Local flagship bars are a distinctive
way to revitalise our core local
power brands. A flagship bar is
located where the brand originated,
reinforcing the brand’s provenance.
It showcases the brand's history and
story, offering unique, memorable
and shareable experiences linked
to the brand. Many of the flagship
bars incorporate microbreweries,
enabling us to offer distinctive and
limited-edition brews in addition
to the regular brews. By the end of
2019, we had flagship bars in seven
markets across Western Europe.
EXCEL IN EXECUTION
DRAUGHT-
MASTER GOES
DIGITAL
With the roll-out progressing well
in Western Europe and starting in
Asia, and with the introduction of
alcohol-free brews and cider, we are
now taking DraughtMaster to the
next level by adding a digital layer.
By complementing the system with
patented hardware and software,
we can create a unique real-time
consumption dataset that will
both empower our customers to
better understand and manage
their business and help us improve
our customer service and supply
chain management. In 2019, we
commenced prescaling of the digital
DraughtMaster in several markets.
IN ACTION
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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WIN IN ALCOHOL-FREE BREWS
SHAPING
ALCOHOL-FREE
IN FRANCE
Tourtel Twist – a brand of 0.0%
brews made of fruit juice and
flavoured beer – was first launched
in France in 2015. It has been a
significant driver of the alcohol-free
category in France, which grew by
150% during the period 2014-2018
and today accounts for around
4% of the total beer market. By
creating a new segment in the
market, the growth of Tourtel has
mostly been incremental to the total
drinks category, but the brand has
also taken volume from soft drinks
and wine, despite being priced at a
premium. Leveraging the success of
Tourtel Twist, in 2019 we launched
Tourtel Botanics – a unique, clean-
label alcohol-free brew made from
barley, plants and fruits and with no
added sugar. In 2019, Tourtel grew
by 2%, commanding a category
market share of 23%.
EXCEL IN EXECUTION
USING MACHINE
LEARNING
Having fully embarked on our
digital journey, we piloted a project
in France utilising machine learning
to improve demand forecasting
accuracy. Using machine learning
for the rich data input, including
sell-in and sell-out data, weather,
external events and promotional
information, we developed an
advanced forecasting tool with
enhanced predictive features.
Seeing significant improvement in
forecasting accuracy, we expect
the digital forecasting tool to free
up time for our demand planners,
enabling them to focus on value-
adding business planning activities.
GROW IN ASIA
WIND FLOWER
SNOW MOON
Wind Flower Snow Moon is a
Chinese premium beer deeply
rooted in its Yunnan heritage. For
many years, it was sold locally
only, but following a wider trend
towards increased consumer interest
in premium Chinese brands with
interesting stories to tell, in 2019
we launched a super-premium line
extension outside Yunnan. Brewed
with a local jasmine essence
and sold in bottles with labels
translating the spirit of the region,
the beer elegantly encapsulates
Shangri-La and local Yunnan culture.
Piloting in eight cities, we saw very
encouraging initial results.
IN ACTION
GROW CRAFT &
SPECIALITY
1664 BLANC
CONTINUES TO
GROW
1664 Blanc is our fastest growing
global brand. Since 2016, this
sophisticated French wheat beer
with a hint of citrus and coriander in
its iconic blue bottle has established
a position as a leading global
speciality brand. Blanc’s popularity
with consumers is indisputable, best
evidenced by the strong double-digit
growth rates achieved across our
markets in Western Europe, Asia and
Eastern Europe. In China, the brand’s
largest market, Blanc enjoys a
unique position in the super-premium
segment, being an important
contributor to the very positive price/
mix. In Russia, Blanc is among the
most premium brands in the market.
In 2019, overall 1664 Blanc volumes
grew by 29%.
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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LIVE BY OUR COMPASS
ENSURING
COMPLIANT
BEHAVIOUR
Integrity, responsibility, and honest
and ethical business conduct
are core values of the Carlsberg
Group. Our Code of Ethics and
Conduct supports our strategy
and helps protect our reputation
as a responsible global brewer.
Supplementing this, our 29 Group
policies and around 200 supporting
manuals aim to mitigate our main
company risks, protect our brands
and highlight what is expected
of employees. Our policies and
manuals are divided into four groups
– governance & strategic risks, legal
& compliance risks, financial risks
and operational risks – and are
available online in local languages.
We actively encourage employees to
report any conduct not in line with
the Group’s ethics and values, and
for this purpose we have established
the Speak Up initiative, guiding
our colleagues on how and where
to raise concerns, anonymously if
needed.
TOGETHER TOWARDS ZERO
HALVING
WATER USAGE
By installing a state-of-the-
art water-recycling plant at the
Fredericia brewery in Denmark, we
will reduce the brewery’s average
water consumption from 2.9 hl of
water per hl of beer to 1.4 hl/hl,
virtually eliminating water waste. In
addition, the water-recycling plant
is estimated to reduce the brewery’s
energy consumption by 10%. The
significant reduction in water
consumption is achieved by recycling
90% of all process water. Serving as
a pilot, we will apply the learnings
across our brewery network in the
pursuit to achieve our Together
Towards ZERO water consumption
target of just 1.7 hl/hl, equivalent to
a 50% reduction versus 2015.
WATCH FILM
carlsberggroup.com/partnerships
IN ACTION
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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TOGETHER TOWARDS ZERO
GREEN FIBRE
BOTTLE
In 2015, we kicked off a project to
develop the world’s first paper bottle
for beer – the Green Fibre Bottle
– and in 2019 we revealed two
research prototypes made
from sustainably sourced wood
fibres. Both bottles have an
inner barrier to allow the bottles
to contain beer and are fully
recyclable. One prototype uses a
thin recycled PET polymer film
barrier, and the other a 100% bio-
based PEF polymer film barrier.
Collaborating with other global
FMCG companies through Paboco
(the paper bottle company), the
prototypes will be used to test the
barrier technology as we seek a
solution to achieving our ultimate
ambition of a 100% bio-based
bottle without polymers.
WATCH FILM
carlsberggroup.com/partnerships
TEAM-BASED PERFORMANCE
GUIDING OUR
BEHAVIOURS
To remain a successful, professional
and attractive brewer in our
markets, we act as one team
with one common goal within our
teams, across markets and between
functions. Since the launch of
SAIL’22 in early 2016, our triple A –
alignment, accountability and action
– has guided our behaviours, shaping
our winning culture. In the employee
survey conducted in 2019, 83% of
employees confirmed that Carlsberg
and its employees live by the 3A
principles in their daily operations.
This was an improvement of 6pp on
2017. The survey also showed a high
engagement score of 84%, an
improvement versus 2016 of 6ppt and
significantly above the industry
average by 12ppt.
IN ACTION
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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KPIs: TOGETHER
TOWARDS ZERO
ZERO CARBON FOOTPRINT
We want to achieve zero carbon emissions at our breweries by
2030, with a 50% reduction by 2022 versus 2015, our baseline year.
Our full value chain target is a 30% reduction in emissions by 2030,
with a 15% reduction by 2022. In 2019, we reduced relative carbon
emissions by 13% (30% reduction since 2015).
ZERO WATER WASTE
We aim to halve water usage at our breweries by 2030, with a 25%
reduction by 2022. At 3.0 hl/hl in 2019, we have improved water
efficiency by 12% compared with our 2015 baseline and by 3% versus
2018. The state-of-the-art water-recycling plant at our brewery in
Denmark will virtually eliminate water waste, reducing water usage to
just 1.4 hl/hl and helping us to speed up progress across the Group.
ZERO IRRESPONSIBLE DRINKING
Our targets include 100% distribution of alcohol-free brews to expand
consumer choice and 100% of our markets to improve on responsible
drinking year on year. In 2019, 99% of packaging carried messages or
icons advising consumers not to drink-drive and not to drink when
underage or pregnant. Ingredients were listed on 90% of our packaging
globally, while 65% contained nutritional information.
ZERO ACCIDENTS CULTURE
We are determined to provide a safe working environment for our
employees, and our aim is to achieve zero lost-time accidents by
2030. In 2019, we saw a reduction in the lost-time accident rate for
employees, down to 3.7 from 4.3 in 2018, reflecting improved
awareness and stricter controls in the highest-risk areas, partly due
to the implementation of our Live Saving Rules programme.
TOGETHER TOWARDS ZERO
DRINK
RESPONSIBLY
Ensuring 100% availability of
alcohol-free brews is an important
target for our ambition of ZERO
irresponsible drinking. To achieve
this, we are working in partnership
with restaurants and bars to make
alcohol-free brews available. A
significant step forward in 2019 was
the inclusion of alcohol-free brews
on DraughtMaster, giving people
the authentic experience of a freshly
poured draught beer, but without
the alcohol. A good example is our
partnerships with on-trade customers
in Sweden, which supported our
alcohol-free volume growth in
Sweden of more than 20%.
WATCH FILM
carlsberggroup.com/partnerships
SAIL’22 KPIs
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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STRENGTHEN THE CORE AND
POSITION FOR GROWTH
DELIVER VALUE
FOR SHAREHOLDERS
GROSS BRAND CONTRIBUTION FROM CORE BEER
ORGANIC GROWTH IN OPERATING PROFIT
Core beer accounts for 93% of own beer revenue and is key to our 24
no. 1 or 2 market positions. Ensuring continued relevance of our local
power brands, including premiumisation, is an important part of the core
beer priority of SAIL’22. We measure our success by our ability to grow
gross brand contribution from core beer. In 2019, this measure grew by
3%, driven by growth in Asia and Western Europe.
WIN IN CRAFT & SPECIALITY
Craft & speciality is an attractive category across our regions, driven by
global consumer trends of premiumisation, authenticity and heritage.
Positively contributing to price/mix and margins, our ambition is to
grow the category, and in 2019 our craft & speciality portfolio volumes
grew by 16%. Our largest brands in the category, 1664 Blanc and
Grimbergen, grew by 29% and 3% respectively.
WIN IN ALCOHOL-FREE BREWS
Alcohol-free brews are a growing category in Western and Eastern
Europe, supported by increased consumer interest in health, wellness and
moderation. In Asia, the category is still in its infancy. We have an
attractive portfolio of alcohol-free brews, many of which leverage the
well-established market position of our local power brands. In 2019,
total volume growth of our alcohol-free brews was 7%, with growth of
10% in our Western Europe markets.
GROW IN ASIA
In 2019, Asia accounted for 31% of Group volumes and 33% of operating
profit. Growing in Asia is a priority of SAIL’22, and in 2019 volumes in
Asia grew organically by 6%, price/mix was 6% and organic operating
profit growth was 23.4%. We saw strong growth for 1664 Blanc and
Tuborg as well as for our local power brands, particularly in China, Laos
and Vietnam. Read more about our results in Asia on pages 16-18.
2018: +6%
2019: +3%
2018: +26%
2019: +16%
2018: +15%
2019: +7%
2018: +15.8%
2019: +23.4%
We achieve organic growth in operating profit by delivering top-
line growth and margin improvement. In 2019, we delivered
strongly against this KPI, achieving 10.5% organic growth in
operating profit, supported by 3.2% revenue growth and 100bp
operating margin expansion. Top-line growth was the result of
volume growth in Asia and positive price/mix in all three
regions.
2018: 11.0% growth
2019: 10.5% growth
ROIC IMPROVEMENT
We aim to continuously improve return on invested capital
(ROIC) by improving earnings and reducing invested capital. In
2019, ROIC improved by 70bp to 8.8%. The main driver of the
improvement was growth in operating profit, a lower tax rate
and lower invested capital. Excluding goodwill, ROIC increased
by 130bp to 22.2%.
2018: +120bp
2019: +70bp
2018: 1.29x
2019: 1.25x
OPTIMAL CAPITAL ALLOCATION
Our capital allocation targets include NIBD/EBITDA of below
2.0x and an adjusted dividend payout ratio of around 50%. At
the end of 2019, NIBD/EBITDA was 1.25x and the proposed
dividend equated an adjusted payout ratio of approximately
50%. From February 2019 to January 2020, we executed a
share buy-back programme of DKK 4.5bn. In 2019, total cash
returns to shareholders amounted to DKK 6.8bn. On 4 February
2020, we launched a new 12-month share buy-back
programme of DKK 5.0bn. Read more about our capital
allocation principles and share buy-backs on the following page.
CAPITAL ALLOCATION
DRIVING OPTIMAL
CAPITAL ALLOCATION
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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SAIL’22 has clear priorities for
how we intend to deliver
shareholder value: by growing
operating profit organically,
improving return on invested
capital and ensuring optimal
capital allocation.
Our capital allocation principles are
well defined:
1.
Investing in our business to drive
long-term sustainable growth.
2. Targeting NIBD/EBITDA of
below 2.0x.
3. Targeting an adjusted payout
ratio of around 50% (adjusted
for special items after tax).
4. Distributing excess cash to
shareholders through share
buy-backs and/or extraordinary
dividends.
5. Deviating from the above only if
value-enhancing acquisition
opportunities arise.
business in Cambodia, the remaining
1.2% of the shares in Carlsberg
Ukraine and a non-controlling stake
in the Chinese craft brewery Jing-A
Brewing Co.
SHARE BUY-BACKS
In February 2019, the Supervisory
Board decided to use share buy-
back programmes as a means to
return excess cash to shareholders.
This followed the healthy
development of the business since
the launch of SAIL’22 in early 2016,
including strong earnings and cash
flow, NIBD/EBITDA well below 2x
and a consistent adjusted payout
ratio in recent years of around 50%.
The purpose of the share buy-back
programmes is to reduce the share
capital and meet obligations related
to our share-based incentive
programmes.
In 2019, we again delivered on the
above priorities, including the
execution of a share buy-back
programme, while also acquiring the
remaining 25% of the shares in our
The size of any share buy-back
programme will depend on the
expected organic and inorganic
investment opportunities needed to
grow the business and the Group’s
intention to maintain NIBD/EBITDA
below 2.0x.
Launched in February 2019, the
Group carried out a 12-month DKK
4.5bn share buy-back programme,
which terminated on 30 January
2020. In fiscal 2019, 4,518,999 B
shares were repurchased at a
purchase price of DKK 4.1bn. For the
full programme, 4,912,500 shares
were repurchased at a purchase price
of DKK 4.5bn.
At the Annual General Meeting on
16 March 2020, the Supervisory
Board will recommend that
4,400,000 treasury shares not used
for hedging of incentive programmes
be cancelled.
On 4 February 2020, the Group
launched a new share buy-back
programme with the intention to buy
back Carlsberg B shares amounting
to DKK 5.0bn during the subsequent
12-month period.
The new share buy-back programme
will be split into two tranches of
approximately six months each, with
each tranche amounting to DKK
2.5bn.
SAFE HARBOUR
The share buy-back programmes are
executed in accordance with the EU
Market Abuse Regulation (also
referred to as the Safe Harbour
Regulation). The Group is entitled to
suspend or stop the programme at
any time. Any such decision will be
disclosed to the public through a
Company announcement.
THE CARLSBERG FOUNDATION
The Carlsberg Foundation
participated pro rata in the 2019
share buy-back programme and
intends to do the same in the 2020
programme.
RISK MANAGEMENT
MANAGING
BUSINESS RISKS
In conducting our business and
executing our strategy, we
seek to manage risks in such a
way as to minimise their
threats while making the best
use of their opportunities.
Our business is subject to a number
of risks and uncertainties that could
have both short-term and long-term
implications for the Group. The
purpose of our risk management
approach is to address these risks
and uncertainties in due time.
GOVERNANCE STRUCTURE
The Supervisory Board is ultimately
responsible for risk management,
and it has appointed the Audit
Committee to act on its behalf in
monitoring the effectiveness of the
Group’s risk management.
are in place for the management of
individual risks, including strategic,
operational, financial and compliance
risks.
The Executive Committee (ExCom)
is responsible for reviewing the
overall risk exposure associated with
the Group’s activities.
Risks are assessed according to a
two-dimensional heat map that
estimates the impact of the risk on
operating profit or brand/image and
the likelihood of the risk
materialising. Based on this
assessment, ExCom identifies the
high-risk issues for the coming year.
ExCom assigns risk owners, who are
responsible for mitigating the risks
through a programme of risk
management activities.
While recurring risks are evaluated
on a quarterly basis, monitoring is
mainly performed in connection with
the half-year reviews. The Audit
Committee has adopted guidelines
for key areas of risk, monitors
developments and ensures that plans
Local entities and Group functions
are responsible for the identification,
evaluation, qualification, recording
and reporting to management of
business risks. Local and functional
risk assessment follows the same
principles and methodology as
Group-level risk assessment. The
responsibility for the local review lies
with the risk officer, typically the
local head of Finance, to ensure that
risk management is incorporated into
management meetings, business
reviews and key decision-making.
Following the risk identification, local
risk owners are assigned and given
responsibility for mitigating the risks
through a programme of risk
management activities.
Risk reporting is incorporated in
regular business reviews, and Group
Risk Management is responsible for
the framework and Group Finance
for facilitating and following up on
risk action plans for the most
significant risks in connection with
regular business reviews.
RISKS IDENTIFIED FOR 2020
The identified risks for 2020 are
shown in the box to the right.
Based on the heat map assessment,
the five highest ranked risks are
described in the following. Since the
assessment, the coronavirus in China
has appeared as a business
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
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IDENTIFIED
RISKS FOR 2020
RISKS WITH HIGHEST POTENTIAL
IMPACT AND PROBABILITY
• Partnerships
• Legal and regulatory compliance
• Customer consolidation
• Cyber and IT security
• Tax
OTHER IDENTIFIED RISKS
• Political and economic instability
• Regulatory changes, incl. duties
• Financial flexibility
• Strategy execution
• Inability to gain volume market
share and drive premiumisation
• Western Europe operating model
• Business interruption
• Pensions
CARLSBERG GROUP ANNUAL REPORT 2019 CREATING VALUE
33
disruption. We are monitoring and
assessing this risk closely.
PARTNERSHIPS
Description
We cooperate with partners in a
number of markets, particularly the
global soft drink manufacturers in
the Nordic countries and some Asian
markets, as well as local joint venture
partners in some Asian and
European markets.
Disagreements with partners on
the operational management and
strategic direction of partnerships
may limit our ability to manage
the growth and risk profile of our
business. In certain partnerships,
the partners’ pursuit of goals and
priorities different from those of the
Group might result in disagreements,
thereby affecting operational and
financial performance. See section
5.1 in the consolidated financial
statements for further details of our
partnerships and the related financial
risks.
Mitigation
The Group continuously seeks to
promote a fair and mutually
beneficial development of the
partnerships, which is crucial for the
partnerships to be successful.
We seek to have an ongoing
dialogue with our partners to
identify any issues at an early
stage. The relevant members of
ExCom are actively involved in
partner relationships, participating
in the ongoing dialogues to ensure
constructive negotiations and
effective and fast resolution of
potential issues.
LEGAL AND REGULATORY
COMPLIANCE
Description
Legal and regulatory compliance
risks include competition law and
data protection compliance, as well
as non-compliance with anti-bribery
& corruption regulations and trade
sanctions. Failure to comply with
regulations and Group policies may
lead to fines, claims, and brand and
reputation damage.
In recent years, the Group has
experienced competition-law dawn
raids in a few jurisdictions. Non-
compliance with competition law is a
real and growing risk, and the Group
is party to certain lawsuits and
disputes. These and their significance
are described in section 3.3 of the
consolidated financial statements.
Mitigation
We are continuously strengthening
the Group-wide control framework
covering all legal compliance areas,
including, but not limited to,
competition law, anti-bribery &
corruption and data protection.
We ensure regular updating of
relevant Group policies, and conduct
regular and compulsory training of
all relevant employees. We actively
set a strong tone from the top and
develop toolkits to help managers
at all levels and in all markets
understand their role in shaping
correct behaviour every day.
Employees are also required to pass
e-learning modules within relevant
legal areas on a continuous basis to
drive awareness and knowledge
building.
CUSTOMER CONSOLIDATION
Description
Consolidation is increasingly taking
place among our customers. This
strengthens their negotiating power
and leads to increased dependency,
potentially resulting in pricing and
margin pressure.
Mitigation
The priorities and initiatives of
SAIL’22 seek to strengthen the
market position of the Group in such
a way that we are able to act upon
and mitigate the impact of industry
consolidation.
Our actions also include leveraging
value management by managing
assortment, price, promotions and
trade terms, and improving our
execution at point of purchase.
Actions and activities are tailored
to local markets to ensure an
appropriate response to individual
challenges and situations.
CYBER AND IT SECURITY
Description
Like all other businesses, the
Carlsberg Group relies heavily on
technology and IT infrastructure
for its day-to-day business. A cyber
attack or non-availability of IT
systems could have severe financial
and reputational consequences for
our business.
Mitigation
We have elevated the role of the IT
security organisation, which has
regular dialogue with the Supervisory
Board and ExCom to agree on risk
mitigation plans and activities. As
part of this, we have established a
Security Advisory Board consisting of
senior managers from across the
business.
This includes improving our core
beer business and strengthening
our portfolio of craft & speciality
and alcohol-free brews. We aim to
be a valued partner of our customers
by providing them with the beers
that consumers are demanding.
In addition, we are implementing an
end-to-end risk management
framework and support system. We
are running awareness-building
activities to ensure that staff at all
levels understand their obligations
with regard to information security.
We are continuously stress-testing
the effectiveness of our controls
through test scenarios.
A range of other initiatives has been
and is being taken to improve our
cyber and IT security, thereby
reducing the risk to the greatest
possible extent.
TAX
Description
Given the Group’s international
presence and business set-up, its
activities involve a high level of
cross-border and inter-company
transactions as well as different legal
structures within and across markets.
The Group generates substantial
revenues for governments through
payment of corporate income tax,
withholding taxes and indirect taxes,
such as excise duties. We pay
taxes as required by law, and the
foundation for handling our tax
affairs is our Tax Policy, which
stipulates good corporate citizenship
and tax transparency.
Mitigation
We are continuously strengthening
our tax control framework, including
documentation of inter-company
transactions, to ensure compliance
with tax legislation, and improving
data quality for VAT and product
classification for excise duties.
Governance
CORPORATE GOVERNANCE
FOCUS ON
CORPORATE GOVERNANCE
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
34
Our governance framework
aims to ensure active business
management across the Group
and reduce risk.
The basis of our corporate
governance includes in particular the
Danish Companies Act, the Danish
Financial Statements Act, IFRS, the
EU Market Abuse Regulation,
Nasdaq Copenhagen A/S’ rules for
issuers of shares, local legislation,
the Company’s Articles of
Association and the rules of
procedure for the Supervisory Board.
The Group has policies for a number
of key areas, including, but not
limited to, anti-bribery & corruption,
competition law, trade sanctions,
data protection, risk management,
labour & human rights, diversity &
inclusion, finance, marketing and
Download our policies
www.carlsberggroup.com/sustainability/
download/download-our-policies
corporate communication,
responsible drinking and public &
government affairs.
as a result of phasing of certain
commercial activities, etc.
The Supervisory Board is responsible
for overseeing that the Executive
Committee has an adequate system
and resources in place to ensure
compliance with these policies.
RECOMMENDATIONS ON
CORPORATE GOVERNANCE
The recommendations of the Danish
Committee on Corporate Governance
form part of Nasdaq Copenhagen
A/S’ rules for issuers of shares. The
Company complies with all but two
of the recommendations, as
explained below.
With respect to the recommendation
to publish quarterly reports, the
Group publishes full- and half-year
reports. The Supervisory Board finds
that half-year financial reporting
is more appropriate due to the
seasonality of the Group’s business
and the fact that the Group
historically has seen high volatility
in quarterly earnings and margins
The Supervisory Board considers the
high volatility to be potentially
misleading for understanding
underlying Group performance. The
Company issues Q1 and Q3 trading
statements, which include volume
and revenue data, along with
comments on sales performance in
the quarter.
Regarding the recommendation that
a majority of the members of a
board committee should be
independent, in 2019 the Audit
Committee and the Remuneration
Committee complied with this, while
two of the four Nomination
Committee members were
independent.
The Company’s statutory report on
corporate governance includes the
full list of the recommendations, with
comments on the Group’s position on
each recommendation.
THE ANNUAL GENERAL
MEETING
The 2019 Annual General Meeting
(AGM) took place on 13 March. The
minutes of the meeting are available
on www.carlsberggroup.com.
Supervisory Board considers whether
the number and scope of the
committees are appropriate. The
board committees prepare and
facilitate Supervisory Board
decisions.
Rules and deadlines applying to the
AGM and other General Meetings
are stipulated in the Company’s
Articles of Association, which are
available on www.carlsberggroup.com
along with other AGM-related
information.
GOVERNANCE STRUCTURE
The Supervisory Board has
established three board committees:
the Audit, Nomination and
Remuneration Committees. For the
time being, the Supervisory Board
considers these committees to be
sufficient; however, each year the
Download our statutory
report on corporate
governance
www.carlsberggroup.com/who-we-are/
corporate-governance/#statutoryreports
The Supervisory Board hires and
supervises the Executive Board,
which consists of the CEO and the
CFO, who are not members of the
Supervisory Board.
The Group also has an Executive
Committee (ExCom), which, in
addition to the CEO and the CFO,
consists of a wider group of
Executive Vice Presidents, portrayed
on pages 50-51. While the Executive
Board members are formally
registered as executive directors of
the Company, ExCom collectively
prepares and implements the
Company’s strategic plans.
COMPOSITION OF THE
SUPERVISORY BOARD
The Supervisory Board currently has
ten members elected by the General
Meeting and, in accordance with the
Danish Companies Act, five members
elected by the employees. None of
the members of the Supervisory
Board are or have been involved in
the executive management of the
Group.
The members elected by the General
Meeting are elected individually and
for a term of one year. Re-election
is possible.
Five of the ten members elected by
the General Meeting are independent
and have an international business
background in addition to
competences related to FMCG,
digital, finance, ESG, supply chain,
procurement and emerging markets.
The other five members are affiliated
to the Carlsberg Foundation, the
Company’s majority shareholder,
and have an academic background.
These members are bearers of the
Carlsberg Group culture and the
heritage and values stemming from
founder J.C. Jacobsen, and the
Supervisory Board sees these
members as patrons of the same.
Supervisory Board meetings
Board member
Flemming Besenbacher (Chairman)1
Lars Fruergaard Jørgensen (Deputy Chairman)1,2
Chairmanship
meetings attended
Board
meetings attended
Lars Rebien Sørensen1,2
Hans Andersen3
Carl Bache1
Magdi Batato1,2
Domitille Doat-Le Bigot1,2
Lilian Fossum Biner1,2
Richard Burrows1,2
Donna Cordner1,2
Eva Vilstrup Decker3
Finn Lok3
Erik Lund3
Søren-Peter Fuchs Olesen1
Peter Petersen3
Majken Schultz1
Nina Smith1
Lars Stemmerik1
1 Elected by the General Meeting. 2 Independent. 3 Employee-elected.
Attended meeting.
Did not attend meeting.
Not a Board member at the time.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
35
The employee representatives are
elected for a term of four years.
They hold the same rights and
obligations as the members elected
by the General Meeting. The current
employee representatives were
elected in 2018 and the next election
will take place in 2022.
The Supervisory Board believes that
the composition of the Board
ensures an appropriate level of
diversity and breadth in the
members’ approach to their duties,
thereby helping to ensure that
decisions are well considered and
that both short- and long-term
perspectives are taken into account.
Each year, the Supervisory Board
considers the skills that should be
represented on the Supervisory
Board on the basis of a
recommendation from the
Nomination Committee. These skills
are described in the Specification of
Competences, available on
www.carlsberggroup.com.
The Nomination Committee and
the Supervisory Board take the
description of the required skills into
consideration when recommending
new candidates for the Supervisory
Board.
Information on the Supervisory
Board members is available on
pages 47-49. Detailed CVs can be
found on www.carlsberggroup.com.
DIVERSITY
The Supervisory Board believes that
its members should be chosen for
their competences and recognises
the benefits of diversity in respect of
experience, culture, international
experience and gender.
Diversity is therefore of high priority
for the Supervisory Board and it has
laid down the following specific
objectives in relation to international
experience and gender:
• With regard to international
experience, the objective is that
50% or more of the Supervisory
Board members elected by the
General Meeting should have
substantial international experience
from managing large corporations
or institutions.
• The proportion of the under-
represented gender (currently
women) on the Supervisory Board
should reach at least 40% of the
members elected by the General
Meeting no later than 2021. The
gender target applies to the boards
of all Danish Carlsberg Group
companies that are required to set
such objectives.
The Supervisory Board fulfils the
objective regarding international
experience. Furthermore, with a
representation of more than 20
nationalities, the international
experience of the Carlsberg Group
top-60 leadership team is significant.
Regarding the gender target,
currently three Supervisory Board
members elected by the General
Meeting are women, i.e. 33%. Hence,
the objective with regard to gender
diversity on the Supervisory Board
has not yet been met.
At Carlsberg Breweries A/S, the four
Supervisory Board members elected
by the General Meeting are men,
being the members of the Chairman-
ship and of the Executive Board of
Carlsberg A/S. At Carlsberg
Danmark A/S and Carlsberg Supply
Company Danmark A/S, one of
three Supervisory Board members is
a woman. At Carlsberg Global
Business Services A/S, all three
Supervisory Board members are
men. For those companies where the
requirements were not met, changing
the approach was not considered
appropriate in 2019.
In 2019, the Group launched an
updated Diversity & Inclusion Policy
that applies to management and all
employees.
The Diversity & Inclusion Policy
describes the Carlsberg Group’s
commitment to diversity and
inclusion. It constitutes the basis for
effective diversity and inclusion
management throughout the
Carlsberg Group. We have defined a
range of internal diversity and
inclusion ambitions to help guide our
decisions, increase awareness and
ensure focus.
To achieve our diversity and inclusion
ambitions, a string of initiatives is
being implemented. We are
monitoring the outcome and
progress of these and benchmarking
ourselves externally against other
companies in the beverage industry.
In 2019, diversity and inclusion
initiatives and achievements
included:
• Updating of the Group’s Diversity &
Inclusion Policy.
• Establishment of the Diversity &
Inclusion Council to ensure
continuous focus and progress on
our diversity and inclusion
ambitions.
• Issuing of new requirements to
recruitment companies and
executive search companies to
ensure stronger representation of
the underrepresented gender
(currently women) on shortlists
when recruiting for senior
management positions.
• 34% of the participants in the
Group's global leadership
programmes were women.
• 43% of the Group’s developmental/
short-term assignments were
women.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
36
SUPERVISORY
BOARD 2019
MAIN TOPICS OF DISCUSSION
Strategy
• Ongoing review of SAIL’22.
• Review of and debate on R&D,
innovation, branding, quality and other
strategic initiatives.
• Monitoring of the continued embedding of
the Funding the Journey culture in the
Group’s ways of working.
• Review and approval of the Group’s
capital structure and funding, including
the decision to increase cash returns to
shareholders by means of share buy-
backs.
• Review and discussion of organic and
potential inorganic opportunities.
Organisation, people, succession planning
and talent management
• Recommendation of Lars Fruergaard
Jørgensen, Domitille Doat-Le Bigot, Lilian
Fossum Biner and Majken Schultz as
candidates for the Supervisory Board at
the 2019 AGM.
• Succession planning for the executive
management.
• Review of the Group’s people agenda,
including approval of updated diversity
policy.
• Organisational restructuring, management
and development of the internal talent
pool, and general succession planning.
• Discussion and approval of the bonus
structures in the Group’s incentive
programme, ensuring support of and
alignment with SAIL’22.
Compliance and core values
• Review of Carlsberg’s compliance risks
and set-up, including debate of
compliance-enhancing efforts.
• Review of the progress of the Group’s
sustainability programme, Together
Towards ZERO.
Governance and risk management
• Review of the outcome of the
Supervisory Board evaluation process,
including follow-up on all
suggestions.
• Review and discussion of the Group
Internal Audit reports, working
processes and continued
improvement.
• Discussion of relevant issues and
ways of working with the external
auditor.
• Approval of the external auditor for
election at the 2019 AGM.
THE WORK OF THE
SUPERVISORY BOARD
The Supervisory Board monitors that
the Executive Board observes the
goals, strategies and business
procedures established by the Board.
The Chairman and Deputy Chairman
of the Supervisory Board constitute
the Chairmanship. The specific duties
of the Chairman – and, in his
absence, the Deputy Chairman – are
set out in the Rules of Procedure. In
2019, the Chairmanship and the
Executive Board held eight meetings.
The Supervisory Board of Carlsberg
A/S held six meetings as well as a
1.5-day strategy seminar.
The Executive Board always attends
the Supervisory Board meetings and,
in order to improve transparency, the
members of ExCom are also invited
and attend when it makes sense.
This gives the Supervisory Board
better insight into the business.
In connection with most Supervisory
Board meetings, the Supervisory
Board and ExCom have “Board
update” sessions at which key people
from the Group present a market, a
function or another relevant topic. In
2019, these included R&D, shared
services, digital, internal audit,
quality, HR and our businesses in
Ukraine, France, the UK, Denmark
and Norway.
SUPERVISORY BOARD
EVALUATION PROCESS
Each year, the Chairman of the
Supervisory Board heads a
structured evaluation of the
Board’s work, accomplishments
and composition. In addition, the
Supervisory Board considers, based
on input from the Nomination
Committee as well as the Board
evaluation process, whether its
members’ expertise should be
updated or strengthened with
respect to their duties and whether
the Board members – in light of
their other management positions –
have adequate time to fulfil their
duties as Carlsberg Board members.
During the evaluation process in
2019, the Supervisory Board
members generally expressed that
they find the pre-read material and
presentations of a high quality, that
the topics and agendas cover
relevant matters adequately, that
meetings are well planned and the
time and discussions well prioritised,
and that they appreciate the open
discussions at the Supervisory Board
meetings with the Executive Board
and other management members.
The Supervisory Board also
expressed satisfaction with the focus
on risk evaluation, strategy and
direction-setting during Board
discussions. The evaluation process
led to a short catalogue of ideas for
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
37
minor changes to the way the
Supervisory Board works. These
ideas were considered and, where
relevant, implemented by the
Supervisory Board.
BOARD COMMITTEES
THE NOMINATION COMMITTEE
In 2019, the Nomination Committee
consisted of four members. The
Nomination Committee is appointed
for one year at a time. Two
Committee members qualify as being
independent, while the other two
members do not.
The Nomination Committee works
according to Terms of Reference,
which are reviewed and approved
annually by the Supervisory Board.
The Terms of Reference are available
on the Company’s website.
In 2019, the Committee had
particular focus on:
• Planning the Board’s evaluation
process.
• Reviewing the Specification of
Competences for Board members
to ensure that they reflect the skills
and experiences needed to best
support the execution of SAIL’22.
• Succession planning at Supervisory
Board and management level,
including identification of Lars
Fruergaard Jørgensen, Lilian
Fossum Biner, Domitille Doat-Le
Bigot and Majken Schultz as
Supervisory Board candidates for
election at the 2019 AGM.
• Evaluating the composition of
ExCom and the composition,
structure and size of the Board.
THE REMUNERATION COMMITTEE
The work of the Remuneration
Committee is described in the
Remuneration report on pages
41-46.
THE AUDIT COMMITTEE
In 2019, the Audit Committee
consisted of three members, all
qualifying as being independent of
the Company. The Audit Committee
is appointed for one year at a time.
The Committee has the relevant
financial expertise and necessary
experience of the Company’s sector.
The Audit Committee works
according to Terms of Reference and
a detailed annual meeting plan,
which are reviewed and approved by
the Supervisory Board prior to the
beginning of each financial year.
The Supervisory Board approved the
Audit Committee meeting plan for
2020 and the current Terms of
Reference at the Supervisory Board
Nomination Committee meetings
Committee member
Flemming Besenbacher (Chairman)
Carl Bache
Richard Burrows
Lars Fruergaard Jørgensen
Lars Rebien Sørensen
Attended meeting.
Not a Board member at the time.
Committee meetings attended
meeting in December 2019. The
Terms of Reference are available on
the Company’s website.
In 2019, the Audit Committee had
particular focus on a number of
areas, including:
• Monitoring the effectiveness of
the control environment and
overseeing progress on developing
a new reporting system on the
effectiveness of the controls over
financial reporting.
• Monitoring the work of the external
auditors.
• Reviewing the progress of the work
of the Group Internal Audit function.
• Reviewing the work of the Integrity
Committee (see page 40).
• Managing financial risk.
• Reviewing the risk management
process.
AUDITING
To safeguard the interests of
shareholders and the general public,
an independent auditor is appointed
at the Annual General Meeting
following a proposal from the
Supervisory Board, which is based on
a recommendation from the Audit
Committee.
INTERNAL CONTROL AND RISK
MANAGEMENT RELATED TO
THE FINANCIAL REPORTING
PROCESS
OVERALL CONTROL ENVIRONMENT
The Supervisory Board and ExCom
have overall responsibility for the
Carlsberg Group’s control
environment.
The Audit Committee is responsible
for monitoring the effectiveness of
the internal control and risk
management systems related to the
financial reporting process.
The Group has a number of policies
and procedures in key areas of
financial reporting, including the
Finance Policy, the Accounting
Manual, the Controller Manual, the
Use of Auditors Policy, the Chart of
Authority, the Risk Management
Policy, the Financial Risk
Management Policy, the Corporate
Governance Policy, the Information
Security & Acceptable Use Policy,
the Records Management &
Personal Data Protection Policy, the
Stock Exchange Compliance Policy,
the Tax Policy, and the Code of
Ethics and Conduct.
Audit Committee meetings
Committee member
Richard Burrows (Chairman)
Magdi Batato
Lilian Fossum Biner
Donna Cordner
Nina Smith
Lars Rebien Sørensen
Flemming Besenbacher1
Committee meetings attended
1 Not a member of the Committee; attends meetings in his capacity as Chairman of the Supervisory Board.
Attended meeting.
Not a Committee member at the time.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
38
THE CARLSBERG
FOUNDATION
The Carlsberg Foundation is the
Company’s majority shareholder.
According to its Charter, the Foundation
must own shares equivalent to at least
51% of the votes in Carlsberg A/S. At
31 December, the Carlsberg
Foundation held 29% of the capital and
75% of the votes in Carlsberg A/S.
The Foundation is a long-term, value-
oriented shareholder, supporting the
Group in creating sustainable value
growth for shareholders and society
through the execution of SAIL’22 and
adherence to the company’s capital
allocation priorities.
The Foundation participates pro rata in
the share buy-back programmes (see
page 31), and in 2019 total cash
returns received by the Foundation
amounted to DKK 2.1bn.
The dividends from Carlsberg A/S to
the Carlsberg Foundation are given
back to society by granting funds to
foster and support academic research
within natural sciences, humanities and
social sciences and funds for cultural
and socially beneficial purposes. In
addition, the Foundation grants funds
to the Carlsberg Research Laboratory.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
39
The policies and procedures apply
to all subsidiaries, and similar
requirements are set out in
collaboration with the partners in
joint ventures.
The Group’s control framework for
financial reporting is designed to
reduce and mitigate financial risks
identified and ensure reliable internal
and external financial reporting.
The framework defines who is
responsible and where the controls
are performed. In 2018 and 2019,
the framework was strengthened by
implementing and improving certain
controls, providing assurance that
key risks are covered by mitigating
internal control assertions.
During the work of strengthening
the framework across functions and
entities, there has been continual
focus on standardising processes
and controls, and on increasing
knowledge through extensive
education and training in risk and
controls.
As a consequence of the Group’s
growth due to acquisitions, processes
are not standardised across entities.
The current state of the control
environment is acceptable, but not
yet where the Group wants to be.
The Group will continue to strengthen
the financial control environment
through further standardisation,
increased automation, strong
analytics and transparent
governance.
The framework is monitored through
entities’ self-assessment of the
effectiveness of the implemented
controls and continuous testing of
performance by an established
second-line-of-defence team. The
monitoring of the performance of the
controls focuses on the quality of the
controls, the effectiveness with which
they are performed and the efficiency
of the overall controlling processes.
RISK ASSESSMENT
With the implementation of the
control framework for financial
reporting, the Group has identified
the risks that could have a direct or
indirect material impact on the
financial statements. Group entities
are required to document transaction
processes and the controls in place
to cover the key risks identified.
The minimum requirements for
documenting the risks must be set
out in the framework and visualised
in the processes.
Group entities are required to
reassess their controls biannually
and must update changes to the
control framework for financial
reporting, including new risks and
controls.
CONTROL ACTIVITIES
The Group has implemented a
formalised financial reporting
process for the strategy process,
budget process, estimates and
monthly reporting on actual
performance. The accounting
information reported by all Group
companies is reviewed by controllers
with regional or functional in-depth
knowledge of the individual
companies/functions and by
technical accounting specialists.
Controllers are continuously updated
on best practice relating to internal
financial controls, and trained in
new accounting and reporting
requirements.
The entities in the Group are
dependent on IT systems. Any
weaknesses in the system controls or
IT environment are compensated for
by manual controls in order to
mitigate any significant risk relating
to the financial reporting.
During 2019, a programme was
initiated for most entities in Western
Europe aimed at standardising
financial reporting processes and
implementing various tools. The
programme will continue in 2020.
The Group has established a quality
assurance team in order to ensure
the quality of the controls that are
part of the outsourced processes,
including their performance.
control documentation, and audits
performed by Group Internal Audit.
INFORMATION AND
COMMUNICATION
The Group has established
information and communication
systems to ensure accounting and
internal control compliance. During
the risk assessment process, Group
entities are required to report on
missing or inadequate controls.
Each entity assesses any need for
compensating controls, or for design
and implementation of new controls.
Furthermore, Group entities have
mapped controls on segregation of
duties to implement necessary
compensating controls, and are now
implementing stronger remediated
controls for segregation of duties in
the ERP systems.
MONITORING
The Audit Committee’s monitoring
covers both the internal control
environment and business risk.
Monitoring of the internal control
environment is covered by the
Group’s control framework for
financial reporting.
The financial risks are assessed
and reviewed at multiple levels
in the Group, including monthly
performance review meetings at
ExCom level, periodic review of
GROUP INTERNAL AUDIT
Group Internal Audit provides
objective and independent
assessment of the adequacy,
effectiveness and quality of the
Group’s internal controls. Group
Internal Audit works in accordance
with a charter, which is reviewed
on an annual basis and approved
by the Audit Committee.
Taking into account the annual
review of business risks (cf. pages
32-33), an internal audit plan is
drawn up for the year. The plan is
reviewed and approved by the Audit
Committee. In 2019, Group Internal
Audit conducted audits mainly in the
areas of financial reporting controls,
compliance (internal and external
regulation) and information
technology.
SPEAK UP
The Carlsberg Group has a Speak Up
system that enables employees to
report misconduct. Reports typically
relate to suspected violations of the
Carlsberg Code of Ethics and
Conduct.
The Speak Up system is operated by
an external provider and allows
concerns to be brought to the
attention of Group Legal and
Compliance anonymously,
In 2019, we saw an increasing
number of Speak Up matters related
to our Indian business. The Group
takes such matters very seriously.
We are currently investigating the
allegations and will take appropriate
measures if they are substantiated.
The incidents have not had any
material impact on the financial
results of the Group except for those
items recognised in the statement of
financial position.
confidentially and via multiple
channels.
The Group Compliance team is
responsible for reviewing all reported
Speak Up matters. Furthermore, an
Integrity Committee, chaired by the
CFO, oversees the follow-up of
major Speak Up investigations and
provides a report to ExCom and the
Audit Committee at least quarterly.
The Integrity Committee report also
contains an overview of other open
and closed investigations, the time
taken to resolve cases and other
general compliance matters.
The Misconduct Investigation
Handbook was updated in 2019 to
clarify how investigations should be
undertaken. During 2019, there was
also a campaign to raise awareness
of the various Speak Up channels
available.
Since the establishment of the Speak
Up system, some reports and their
subsequent investigation have led to
disciplinary sanctions, including
dismissal on the basis of violation of
the Code of Ethics and/or Group
policies and, in some cases, relevant
criminal laws. Some of these matters
related to isolated incidents of fraud
carried out by individual employees
in the Group.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
40
+14%
SOMERSBY VOLUME
GROWTH
We are increasingly looking into how we can
leverage our brewing capabilities to further
expand and develop our portfolio. Our cider
brand Somersby is an excellent example of
this. Launched in Denmark in 2008, it has
become the leading global cider brand, with a
presence in more than 60 countries. In recent
years, we have developed a strong portfolio of
Somersby brews to provide different sources of
growth and become more than just another
cider. The success of Somersby in recent years
is due in no small measure to the fact that
volumes are captured from categories outside
beer. Market studies show that these line
extensions capture up to 35% of volumes from
wine and cocktails. In 2019, Somersby volumes
grew by 14%.
POSITION FOR GROWTH
REMUNERATION REPORT
EXECUTIVES’
REMUNERATION
We want our executives
to share our shareholders’
interests, and the
remuneration of executive
directors should therefore
support this alignment.
The Remuneration Committee did
not propose any changes to the pay
structure in 2019. In accordance with
the new requirements related to the
EU Shareholder Rights Directive, the
Remuneration Policy will be
presented to the Annual General
Meeting (AGM) for voting.
REMUNERATION OF THE
EXECUTIVE BOARD
REMUNERATION POLICY
The main elements of the executive
directors’ remuneration arrangements
are summarised in the table on page
43 and explained in more detail in
the following paragraphs.
Fixed salary
The Remuneration Committee
reviews fixed salaries for the
executive directors annually, taking
into account a number of relevant
factors, including the individual’s
performance, role and
responsibilities. Executives make
their own provision for retirement,
meaning that no additional pension
contributions are made on their
behalf. The Committee also takes
into account levels of remuneration
for similar roles at comparable
companies in both the beverage and
FMCG sectors, as well as companies
based in the Nordic region across all
industry sectors.
The Committee and the Supervisory
Board have decided to increase the
executive directors’ fixed salaries in
2020 by 2.25%.
Annual bonus
The annual bonus is structured to
incentivise the executive directors to
deliver on the Group’s short-term
strategic objectives.
For 2020, the potential maximum
bonus will remain at 100% of fixed
salary, with 60% of fixed salary
payable for on-target performance.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
41
OUR APPROACH TO
REMUNERATION
The Carlsberg Group’s remuneration is
designed to enable us to recruit and retain
individuals with the expertise and ability
required to run a growing international
company, and to do so in a way that
drives our business success and rewards
executives when shareholders are rewarded.
Levels of fixed remuneration are set based
on individuals’ experience and contribution,
and in the context of the external market.
While we do not seek to adhere rigidly to
market benchmarks, we monitor and take
into account pay levels and incentive
opportunities in the principal markets from
which we recruit: our European brewing and
spirits peers and the global consumer goods
sector, as well as companies across industry
sectors in the Nordic region.
Many of our investors – including our
main shareholder – are long-term holders
of our shares. We want our executives to
share our shareholders’ perspective and
believe that remuneration should align their
interests accordingly. The balance between
the short-term remuneration package and
long-term share-based pay and
shareholding requirements strengthens this
alignment.
The Company’s full Remuneration Policy for
the Supervisory Board and Executive Board,
and guidelines for incentive programmes as
approved at the Annual General Meeting on
30 March 2017 are available on the
Company’s website. At the AGM on 16
March 2020, an updated Remuneration
Policy will be presented for voting. The
updated policy does not change any key
elements of the previous policy or
Company practice, but makes
clarifications to meet new regulatory
requirements.
MAIN ACTIVITIES IN 2019
During 2019, the main activities of the
Remuneration Committee were:
• Considering stakeholders' feedback
from the 2019 Annual General
Meeting and from media.
• Reviewing the Remuneration Policy
for the Executive Board and agreeing
to make changes to the policy.
• Reviewing some of the Company’s
key pay practices below Executive
Board level, notably in relation to
equal pay.
• Considering the achievement of
performance criteria for the annual
bonus plan and long-term incentives
for 2019.
• Reviewing fixed salary levels and
targets and levels for the short-term
and long-term incentive awards for
2020.
2020 OBJECTIVES
• Monitoring the implementation of the
EU Shareholder Rights Directive and
ensuring that we continue to report
transparently and in line with all
relevant guidelines and regulations.
Determination of the final bonus
is subject to the discretion of the
Committee and the Supervisory
Board, taking into account the
overall performance of the business.
Unchanged from 2019, for 2020
the annual bonus will comprise
two elements. The first element,
accounting for 80% of the bonus,
will be based on three measures:
organic revenue growth, organic
operating profit and addressable
cash flow.
The second element, accounting for
20%, will be linked to performance
against measures that reflect the
Group’s strategic priorities. For both
the CEO and the CFO, these
elements will in 2020 be linked to
the Funding the Journey culture
(10%) and our sustainability
programme, Together Towards
ZERO (10%).
Long-term incentive arrangements
Since 2017, the long-term incentive
arrangements for the executive
directors have consisted of
performance shares only.
Performance shares vest three
years after the grant date, subject
to performance conditions. The
maximum value of awards that can
be made in any single financial year,
based on face value, is 300% of fixed
salary.
Each year, the Committee
determines the total level of the
long-term incentive award to be
made to each executive. All long-
term incentive awards are made at
the discretion of the Committee.
The vesting of any performance
shares is subject to achievement of
performance conditions determined
by the Committee prior to the grant
date.
The performance share award will
be subject to four performance
conditions measured over three
years: relative total shareholder
return, adjusted earnings per share,
organic revenue growth and return
on invested capital.
The performance conditions increase
and support alignment of the
executive directors’ reward with
the long-term Group strategy and
shareholder value. In order for any
award (or part of an award) to vest,
the Committee must be satisfied that
underlying Group performance is at a
satisfactory level.
Remuneration Committee meetings
Committee member
Richard Burrows (Chairman)
Magdi Batato
Domitille Doat-Le Bigot
Søren-Peter Fuchs Olesen
Lars Rebien Sørensen
Flemming Besenbacher¹
Committee meetings attended
1 Not a member of the Committee; attends meetings in his capacity as Chairman of the Supervisory Board.
Attended meeting.
Not a Board member at the time.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
42
THE
COMMITTEE’S
RESPONSIBILITIES
The Carlsberg Group’s Remuneration
Committee is responsible for the
Remuneration Policy (including the
general guidelines for incentive
programmes) for all members of the
Supervisory Board and the Executive
Board, for making proposals on
changes to the Remuneration Policy,
and for obtaining the approval of the
Supervisory Board prior to seeking
shareholders’ approval at the Annual
General Meeting.
The Committee is responsible for
making proposals to the Supervisory
Board on the actual structure and
content of the remuneration packages
of members of the Supervisory
Board and the Executive Board, in
accordance with the policy approved by
the shareholders.
The Committee advises the Supervisory
Board on any major changes to the
policy on senior employee remuneration
structures for the Group, including for
ExCom. The Committee’s Terms of
Reference, which govern how it
operates, are approved by the
Supervisory Board and are available
on the Company’s website.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
43
Remuneration Policy
Element of pay
Fixed salary
Objective
Award level
Performance criteria
Weighting
Performance period
Attract and retain high-performing individuals by
reflecting market value of role and executive’s skills and
experience. Reward day-to-day performance. Set at a
level to prevent over-reliance on variable pay.
Takes into account the market rate for similar roles in
comparable international companies as well as
executives’ skills and experience.
No performance criteria per se, but the
performance of the individual is taken into
account when fixed salary levels are reviewed.
N/A
Financial year.
Benefits
Operate a competitive benefits suite to aid recruitment
and retention.
Perquisites and other benefits corresponding to market
practices.
Pension
Executives make their own provision for retirement.
N/A
Annual bonus plan
Drive and reward delivery of short-term business
objectives.
Maximum bonus opportunity is 100% of fixed salary.
Bonus opportunity at target is 60% of fixed salary.
N/A
N/A
• Organic operating profit.
• Addressable cash flow.
• Organic revenue growth.
• Strategic measures (see page 42).
Long-term incentive plan
Drive and reward delivery of longer-term business
objectives. Maximise alignment with shareholder value.
The maximum level of long-term incentive awards is
300% of fixed salary based on the face value of the
award at the grant date.
• Relative total shareholder return (TSR).
• Growth in adjusted EPS at constant currencies.
• Organic revenue growth.
• ROIC at constant currencies.
N/A
N/A
N/A
N/A
Financial year.
3 years with 3-year
vesting.
35%
25%
20%
20%
25%
25%
25%
25%
Performance share awards – performance criteria for 2020
Measure
Description
Performance condition measured over the three financial years 2020-2022
Relative total shareholder
return (TSR)
TSR measures the total return to investors. The Group’s TSR
performance will be measured relative to a comparator
group of 16 companies¹.
• 25% of TSR element vests if the Group’s TSR performance is at median of peer group’s¹.
• 100% vests for upper-quartile performance.
• Straight-line vesting between median and upper quartile.
Adjusted EPS growth
Adjusted EPS growth targets measure the Group’s underlying
financial success.
• 25% of the adjusted EPS at constant currencies element vests for 4% p.a. growth.
• 100% vests for 9% p.a. growth.
• Straight-line vesting between 4% p.a. and 9% p.a.
Organic revenue growth
Organic revenue growth is a measure of the Group’s ability to
deliver on our SAIL’22 priorities.
• 25% of the organic revenue element vests for 1.5% p.a. growth.
• 100% vests for 4.5% p.a. growth.
• Straight-line vesting between 1.5% p.a. and 4.5% p.a.
Growth in ROIC
Growing ROIC is a key financial metric reflecting our ability to
drive a positive development in shareholder returns.
• 25% of the ROIC in constant currencies element vests at 9.5% in 2022.
• 100% vests for 10.5% in 2022.
• Straight-line vesting between 9.5% and 10.5% in 2022.
¹ TSR comparator group: Kirin Holdings, Britvic, Davide Campari-Milano, Rémy Cointreau, Asahi Group Holdings, Compañía Cervecerías Unidas, Diageo, Heineken, Ambev, Brown-Forman, Pernod-
Ricard, Sapporo Holdings, Dr Pepper Snapple Group, Tsingtao Brewery, Anheuser-Busch Inbev and Molson Coors Brewing.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
44
Reclaiming variable pay
In the event of serious misconduct,
or if an annual bonus or long-term
incentive award is made on the basis
of accounts that prove to be
materially misstated, the Company
may reclaim, in full or in part, any
overpayment from the annual bonus,
or cancel or withdraw unexercised or
unvested long-term incentive awards
made to the executive directors.
Share ownership guidelines
In order to strengthen the alignment
between executive directors and
shareholders, the CEO is expected
to build up a holding of shares
equivalent to 150% of fixed salary,
and the CFO a holding equivalent to
120% of fixed salary.
Executive directors’ service contracts
Service contracts for executive
directors contain terms and
conditions that are considered
common to executive board
members in Danish listed companies.
REMUNERATION OF THE
EXECUTIVE BOARD IN 2019
The remuneration of and the share
options and performance shares
granted to the executive directors in
2019 are shown on the following
page.
Fixed salary
The annual fixed salary paid to
Cees ’t Hart in 2019 was DKK
12.6m. The annual fixed salary for
Heine Dalsgaard was DKK 7.6m.
Annual bonus
For the financial year 2019, 90.4%
of the maximum bonus was payable
for performance in 2019 for the
CEO. The bonus payable amounts to
DKK 11.4m for Cees ’t Hart.
For the CFO, 93.4% of the maximum
bonus was payable for performance
in 2019. The bonus payable
amounts to DKK 7.1m for Heine
Dalsgaard.
Long-term incentive awards
Granted in 2019
In the financial year 2019, the CEO
and the CFO were granted long-
term incentive awards with a face
value of 255% and 210% of fixed
full-year salary respectively at the
time of award. The composition of
these awards is shown in the table
on the next page.
Shareholdings
The number of shares in Carlsberg
A/S held by Cees ’t Hart and Heine
Dalsgaard and the movements
during 2019 are shown in the table
on the next page. The table includes
the holdings of the related parties of
the CEO and the CFO.
None of the executive directors own
shares in any of the subsidiaries or
associates of Carlsberg A/S.
programmes, retirement benefit
plans or other schemes.
No agreements have been entered
into concerning termination benefits,
and no such payments were made in
2019.
REMUNERATION OF THE
SUPERVISORY BOARD IN 2019
The fees for members of the
Supervisory Board for the financial
year 2019 are set out in the table on
page 46.
There will be no changes to the
Supervisory Board fees in 2020.
The number of shares in Carlsberg
A/S held by Supervisory Board
members, including holdings of
related parties, at the beginning of
the financial year and movements
to 31 December 2019 are also
shown on page 46.
No member of the Supervisory
Board owns shares or bonds in any
of the subsidiaries or associates of
Carlsberg A/S.
REMUNERATION OF THE
SUPERVISORY BOARD
REMUNERATION POLICY
The remuneration of the Supervisory
Board for 2019 was approved by the
Annual General Meeting in March
2019.
The members of the Supervisory
Board of Carlsberg A/S are
remunerated for duties performed
in the Company. The fees are
reviewed, but not necessarily
increased, each year, taking into
account market practice with
reference to an international
comparator group as well as the
need to attract and retain high-
calibre individuals.
The remuneration of the Supervisory
Board consists of a fixed annual
base fee. The Chairman receives
a single fee of four-and-a-half
times the base fee and no additional
fee for any committee work. The
additional fee for committee work
for other members of the
Supervisory Board is shown in
the table on page 46.
Members of the Supervisory Board
are not included in share incentive
Remuneration of executive directors
Executive directors’ granted share options and performance shares
The table below shows the total remuneration of the executive directors. The amount of remuneration in the
form of unvested share awards does not reflect the value of shares transferred to or cash equivalents received
by the executive directors during the year. The amount only reflects the technical accounting charge to the
income statement required by IFRS.
The table outlines the share options and performance shares granted to the executive directors. The number of
shares in the table is the maximum number of shares that can vest, based on an assessment of the extent to
which the vesting conditions are expected to be met. The number of shares expected to vest is revised on a
regular basis until vesting.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
45
Cees ’t Hart
Heine Dalsgaard
Exercise
year
1 Jan.
2019
Granted
Exercised
Adjusted
31 Dec.
2019
Number
For
exercise
31 Dec.
DKK
million
Fair value
31 Dec.
DKK million
Fixed salary
Cash bonus
Other benefits
Remuneration settled in cash
Other non-monetary benefits
Unvested share awards
Remuneration, non-monetary
and share-based
Total cash and non-cash
Share ownership guidelines
2019
12.6
11.4
1.1
25.1
0.1
24.6
24.7
49.8
2018
12.3
12.3
1.1
25.7
0.1
26.7
26.8
52.5
2019
7.6
7.1
-
14.7
0.3
12.4
12.7
27.4
Share ownership
guideline as % of
fixed salary
150%
120%
Fair value of unvested options
and performance shares as %
of fixed salary (prior to
deduction for tax and
incidental costs)
1,408%
805%
Actual % held
at 31 Dec. 2019
220%
261%
Cees ’t Hart
Heine Dalsgaard
2018
Grant year
7.4
7.4
-
14.8
0.3
13.3
13.6
28.4
SHARE OPTIONS
Cees ’t Hart
2015
2016
Total
2018
-2023
2019
-2024
97,334
17,650
114,984
PERFORMANCE SHARES
-
-
-
-
-
-
97,334
97,334
17,650
17,650
114,984
114,984
-
-
-
-
-
-
Cees ’t Hart
2016-2018
2017-2019
2018-2020
2019-2021
Total
Heine Dalsgaard
2016-2018
2017-2019
2018-2020
2019-2021
Total
2019
2020
2021
2022
2019
2020
2021
2022
14,709
50,000
44,263
-
40,954
-12,208
-2,501
-
-
-
-
-
-
-
50,000
44,263
40,954
108,972
40,954
-12,208
-2,501
135,217
10,370
24,877
22,023
-
57,270
-
-
-
20,377
20,377
-8,607
-1,763
-
-
-
-
-
-
-8,607
-1,763
-
24,877
22,023
20,377
67,277
FUNDING THE JOURNEY PERFORMANCE SHARES
Executive directors’ holdings of Carlsberg A/S shares
Cees ’t Hart
2016-2018
Total
Heine Dalsgaard
2019
23,415
23,415
2016-2018
2019
13,827
Number
DKK million
Cees ’t Hart
B shares
Heine Dalsgaard
B shares
7,200
7,515
35,623
22,459
-15,000
-10,000
27,823
19,974
27.65
19.85
1 Jan. 2019
Additions
Sold
31 Dec. 2019 Market value
Total
Total
-
-
-
-
-23,415
-23,415
-13,827
-13,827
-
-
-
-
-
-
-
-
13,827
318,468
61,331
-58,057
-4,264
317,478
114,984
237
48
6
54
-
44
42
36
122
-
22
21
18
61
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Supervisory Board remuneration principles in 2019
All Supervisory Board members
Chairman of the Supervisory Board¹
Deputy Chairman of the Supervisory Board
Chairman of the Audit Committee
Chairman of the Remuneration Committee and of the Nomination Committee
Member of Board committee (per committee)
¹ The Chairman does not receive any additional fees for committee work.
Base fee
(DKK
thousand)
Additional
fee (as %
of base fee)
412
350%
50%
113%
50%
38%
Remuneration of the Supervisory Board
DKK million
2019
2018
Flemming Besenbacher (Chairman of the Supervisory Board and of
the Nomination Committee)
Lars Fruergaard Jørgensen (Deputy Chairman)
Hans Andersen
Carl Bache
Magdi Batato
Domitille Doat-Le Bigot
Lilian Fossum Biner
Richard Burrows (Chairman of the Audit and Remuneration Committees)
Eva Vilstrup Decker
Finn Lok
Erik Lund
Søren-Peter Fuchs Olesen
Peter Petersen
Majken Schultz
Lars Stemmerik
Donna Cordner¹
Nancy Cruickshank²
Kees van der Graaf
Nina Smith¹
Lars Rebien Sørensen¹
Total
1.85
0.62
0.41
0.54
0.69
0.45
0.45
1.15
0.41
0.41
0.41
0.54
0.41
0.33
0.41
0.18
-
-
0.11
0.22
9.59
¹ Stepped down from the Supervisory Board at the AGM in March 2019.
² Stepped down from the Supervisory Board in May 2018 to become head of Digital Business Transformation at
Carlsberg.
1.85
-
0.41
0.41
0.46
-
-
0.90
0.41
0.41
0.41
0.41
0.41
0.41
0.88
0.20
0.15
0.54
1.09
9.35
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
46
Supervisory Board members’ holdings of Carlsberg A/S shares
1 Jan. 2019
Additions
Sold
31 Dec. 2019 Market value
Number
DKK million
Flemming Besenbacher
B shares
1,850
Lars Fruergaard Jørgensen
B shares
Hans Andersen
Carl Bache
Magdi Batato
Domitille Doat-Le Bigot
Lilian Fossum Biner
Richard Burrows
-
Eva Vilstrup Decker
Finn Lok
Erik Lund
B shares
B shares
B shares
B-shares
B-shares
B shares
B shares
B shares
B shares
Søren-Peter Fuchs Olesen
B shares
Peter Petersen
Majken Schultz
Lars Stemmerik
Total
B shares
B shares
B shares
-
1
-
101
-
-
2,040
68
-
54
652
-
-
-
-
152
-
-
-
-
250
-
-
-
-
-
-
-
-
4,766
402
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,850
152
1
-
101
-
250
2,040
68
-
54
652
-
-
-
1.84
0.15
-
-
0.10
-
0.25
2.03
0.07
-
0.05
0.65
-
-
-
5,168
5.14
SUPERVISORY BOARD
SUPERVISORY
BOARD MEMBERS
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
47
LARS FRUERGAARD JØRGENSEN
DEPUTY CHAIRMAN (SINCE 2019)
Nationality: Danish
Year of birth: 1966
Appointed (until): 2019 (2020)
BOARD FUNCTION
Non-executive, independent director.
BOARD COMMITTEES
Nomination Committee.
PROFESSION
President & CEO, Novo Nordisk.
NON-EXECUTIVE FUNCTIONS
None other than Carlsberg A/S.
OUR
SUPERVISORY
BOARD
MEMBERS
FLEMMING BESENBACHER
CHAIRMAN (SINCE 2012)
Nationality: Danish
Year of birth: 1952
Appointed (until): 2005 (2020)
BOARD FUNCTION
Non-executive, non-independent
director.
BOARD COMMITTEES
Nomination Committee (Chair).
PROFESSION
Professor, D.Sc., h.c. mult, FRSC;
Chairman of the Board of Directors
of the Carlsberg Foundation.
NON-EXECUTIVE FUNCTIONS
Chairman of the Board of Directors
of Aarhus Water and UNLEASH. Vice
Chairman of Innovation Fund
Denmark. Member of the Board of
Directors of Unisense.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
48
HANS ANDERSEN
Nationality: Danish
Year of birth: 1955
Appointed (until): 1998 (2022)
MAGDI BATATO
Nationality: Swiss
Year of birth: 1959
Appointed (until): 2018 (2020)
LILIAN FOSSUM BINER
Nationality: Swedish
Year of birth: 1962
Appointed (until): 2019 (2020)
BOARD FUNCTION
Employee representative.
BOARD COMMITTEES
None.
PROFESSION
Brewery worker, Carlsberg Supply
Company Danmark A/S.
NON-EXECUTIVE FUNCTIONS
None.
CARL BACHE
Nationality: Danish
Year of birth: 1953
Appointed (until): 2014 (2020)
BOARD FUNCTION
Non-executive, non-independent
director.
BOARD COMMITTEES
Nomination Committee.
PROFESSION
Professor, Ph.D., Dr.Phil.; head of
the Doctoral School of the
Humanities at the University of
Southern Denmark.
NON-EXECUTIVE FUNCTIONS
Member of the Board of Directors of
the Carlsberg Foundation and of the
Board of Directors of a publishing
firm.
BOARD FUNCTION
Non-executive, independent director.
BOARD FUNCTION
Non-executive, independent director.
BOARD COMMITTEES
Audit Committee, Remuneration
Committee.
PROFESSION
Executive Vice President and Head of
Operations, Nestlé S.A.
NON-EXECUTIVE FUNCTIONS
Member of the Board of the World
Business Council for Sustainable
Development.
DOMITILLE DOAT-LE BIGOT
Nationality: French
Year of birth: 1972
Appointed (until): 2019 (2020)
BOARD FUNCTION
Non-executive, independent director.
BOARD COMMITTEES
Remuneration Committee.
PROFESSION
Chief Digital Officer, Danone.
NON-EXECUTIVE FUNCTIONS
None other than Carlsberg A/S.
BOARD COMMITTEES
Audit Committee.
PROFESSION
Non-executive board director.
NON-EXECUTIVE FUNCTIONS
Chairman of the Board of Directors
of Cloetta and member of the Board
of Directors of Scania. a-connect,
Givaudan and L E Lundbergföretagen.
RICHARD BURROWS
Nationality: Irish
Year of birth: 1946
Appointed (until): 2009 (2020)
BOARD FUNCTION
Non-executive, independent director.
BOARD COMMITTEES
Audit Committee (Chair),
Remuneration Committee (Chair),
Nomination Committee.
PROFESSION
Non-executive board director.
NON-EXECUTIVE FUNCTIONS
Chairman of the Board of Directors
of British American Tobacco.
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
49
EVA VILSTRUP DECKER
Nationality: Danish
Year of birth: 1964
Appointed (until): 2014 (2022)
ERIK LUND
Nationality: Danish
Year of birth: 1964
Appointed (until): 2015 (2022)
PETER PETERSEN
Nationality: Danish
Year of birth: 1969
Appointed (until): 2010 (2022)
LARS STEMMERIK
Nationality: Danish
Year of birth: 1956
Appointed (until): 2010 (2020)
BOARD FUNCTION
Employee representative.
BOARD COMMITTEES
None.
BOARD FUNCTION
Employee representative.
BOARD COMMITTEES
None.
PROFESSION
Director, Carlsberg Breweries A/S.
PROFESSION
Head Brewer, Carlsberg A/S.
NON-EXECUTIVE FUNCTIONS
None other than Carlsberg A/S.
NON-EXECUTIVE FUNCTIONS
None other than Carlsberg A/S.
FINN LOK
Nationality: Danish
Year of birth: 1958
Appointed (until): 2014 (2022)
SØREN-PETER FUCHS OLESEN
Nationality: Danish
Year of birth: 1955
Appointed (until): 2012 (2020)
BOARD FUNCTION
Employee representative.
BOARD COMMITTEES
None.
PROFESSION
Ph.D. and Brew Master, Principal
Scientist, Carlsberg A/S.
NON-EXECUTIVE FUNCTIONS
None other than Carlsberg A/S.
BOARD FUNCTION
Non-executive, non-independent
director.
BOARD COMMITTEES
Remuneration Committee.
PROFESSION
Professor, D.M.Sc; CEO of the
Danish National Research
Foundation.
NON-EXECUTIVE FUNCTIONS
Member of the Board of Directors of
the Carlsberg Foundation.
BOARD FUNCTION
Employee representative.
BOARD COMMITTEES
None.
PROFESSION
President of the Staff Association;
Process Lead, Carlsberg Supply
Company Danmark A/S.
NON-EXECUTIVE FUNCTIONS
None other than Carlsberg A/S.
MAJKEN SCHULTZ
Nationality: Danish
Year of birth: 1958
Appointed (until): 2019 (2020)
BOARD FUNCTION
Non-executive, non-independent
director.
BOARD COMMITTEES
None.
PROFESSION
Professor, Ph.D., Copenhagen
Business School. International
Research Fellow, Saïd Business
School, Oxford University.
NON-EXECUTIVE FUNCTIONS
Member of the Board of Directors
of the Carlsberg Foundation,
Realdania and Danish Crown.
BOARD FUNCTION
Non-executive, non-independent
director.
BOARD COMMITTEES
None.
PROFESSION
Professor, D.Sc., University of
Copenhagen.
NON-EXECUTIVE FUNCTIONS
Member of the Board of Directors of
the Carlsberg Foundation.
The Supervisory Board
members’ full CVs,
including their skills
and competences, are
available online
www.carlsberggroup.com/who-we-
are/about-the-carlsberg-
group/supervisory-board/
EXECUTIVE COMMITTEE
EXCOM
MEMBERS
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
50
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
51
strong experience in the global drinks
business, having served in a wide
range of international sales and
marketing roles for Grand
Metropolitan plc, Foster’s Brewing
Group and S&N plc.
BBH and head of Export, License &
Duty Free. In 2016, he became
Managing Director of Carlsberg
Malaysia. Prior to joining Carlsberg,
Lars was with Action Nordic and
Unilever Denmark.
in the Executive Committee. Chris
previously worked for H.J. Heinz,
where he held various senior
management positions in Continental
and Eastern Europe and the Far
East. Before Heinz, Chris worked for
The Coca-Cola Company and P&G.
PHILIP A. HODGES
JACEK PASTUSZKA
EXECUTIVE VICE PRESIDENT
GROUP SUPPLY CHAIN
Nationality: Swiss/British
Year of birth: 1966
Appointed: 2017
EXECUTIVE VICE PRESIDENT
WESTERN EUROPE
Nationality: Polish
Year of birth: 1963
Appointed: 2015
experience includes various senior
management and financial positions
at Carpetland, Hewlett Packard and
Arthur Andersen.
JOÃO ABECASIS
CHIEF COMMERCIAL OFFICER
Nationality: Portuguese
Year of birth: 1972
Appointed: 2019
PRIOR EXPERIENCE
João joined the Carlsberg Group in
2011 as CCO and later Managing
Director of Super Bock, our associate
in Portugal. In 2016, he became Vice
President for smaller markets in the
Western Europe region. He also
served as intermediate Managing
Director of Carlsberg Danmark. In
2017, he became Managing Director
of our French business, Kronenbourg.
Earlier in his career, João held a
range of sales and marketing roles at
Unilever.
OUR EXCOM
MEMBERS
CEES ’T HART
CEO
Nationality: Dutch
Year of birth: 1958
Appointed: 2015
PRIOR EXPERIENCE
Prior to joining the Carlsberg Group,
Cees was CEO of the Dutch dairy
company Royal FrieslandCampina, a
position he had held since 2008.
Prior to FrieslandCampina, Cees
spent 25 years with Unilever, holding
management positions across
Eastern Europe, Western Europe and
Asia and with the last position being
member of the Europe Executive
Board. Cees is Chairman of the
Supervisory Board of KLM and
member of the Board of AFKLM.
HEINE DALSGAARD
CFO
Nationality: Danish
Year of birth: 1971
Appointed: 2016
PRIOR EXPERIENCE
Heine joined Carlsberg from ISS, one
of the world’s largest facility services
companies. He went to ISS in 2013,
prior to the company’s IPO in 2014.
Before ISS, he was Group CFO at
Grundfos. Heine’s previous
PRIOR EXPERIENCE
Philip joined the Carlsberg Group in
2017. His most recent position was
at Mondelēz, where he was Senior
Vice President, heading up the
integrated supply chain in Europe for
Mondelēz International. His previous
experience includes managerial
positions with Kraft Foods in Europe,
Asia and the USA within supply chain
and finance.
GRAHAM FEWKES
EXECUTIVE VICE PRESIDENT
ASIA
Nationality: British
Year of birth: 1968
Appointed: 2014
LARS LEHMANN
EXECUTIVE VICE PRESIDENT
EASTERN EUROPE
Nationality: Danish
Year of birth: 1966
Appointed: 2019
PRIOR EXPERIENCE
Graham joined the Carlsberg Group
as Vice President Commercial, Asia
in 2008, before becoming Senior Vice
President of Group Sales, Marketing
& Innovation in 2014. Graham has
PRIOR EXPERIENCE
Lars joined Carlsberg in 2003 as
Commercial Development Director.
Since then, he has held several
management positions, including VP
Commercial for Eastern Europe &
PRIOR EXPERIENCE
Jacek was appointed EVP, Western
Europe in 2019. Before that, he was
EVP, Eastern Europe. Jacek joined
Carlsberg in 2009 and has been
Managing Director of our businesses
in Poland, Norway and Russia. His
prior career included various
managerial sales positions in P&G in
multiple markets, Commercial VP for
Danone in Poland and the Baltics,
and General Manager for AIG
operations in Poland.
CHRIS WARMOTH
EXECUTIVE VICE PRESIDENT
GROUP STRATEGY
Nationality: British
Year of birth: 1959
Appointed: 2014
PRIOR EXPERIENCE
Chris joined Carlsberg as Senior Vice
President, Asia in 2014. During his
tenure, he has held several positions
SHARE INFORMATION
INFORMATION
FOR SHAREHOLDERS
Carlsberg A/S is listed on
Nasdaq Copenhagen. The
Company has around 40,500
registered shareholders.
The Company has two share classes:
Carlsberg A and Carlsberg B. An A
share carries 20 votes, while a B
share carries two votes and is
entitled to a preferential dividend.
The B share is included in the
Nasdaq OMX Nordic Large Cap and
OMXC20 blue-chip indices.
The Carlsberg B share price was DKK
993.8 at 30 December 2019, an
increase of 43.5% during the year
compared to +27.4% for the
OMXC20 share index.
As a supplement to its Copenhagen
listing, the Company has established
a sponsored level 1 ADR (American
Depository Receipt) programme with
J.P. Morgan. The ADRs trade over-
the-counter in the USA under the
symbol CABGY. More information on
CARLSBERG B SHARE AND OMXC20
SHARE INDEX DEVELOPMENT 2019
SHAREHOLDER GEOGRAPHIC SPLIT
(excluding the Carlsberg Foundation
and treasury shares)
CARLSBERG GROUP ANNUAL REPORT 2019 GOVERNANCE
52
the ADR programme is available on
our investor website.
Company is conducting a share buy-
back programme. For more
information, see page 31.
annual and half-year reports, and a
two-week silent period prior to the
Q1 and Q3 trading statements.
MAJOR SHAREHOLDERS
At 31 December 2019, the
Company’s largest shareholder was
the Carlsberg Foundation with 29%
of the capital and 75% of the votes.
In accordance with section 29 of the
Danish Securities Trading Act,
Massachusetts Financial Services
Company (Boston, USA) has notified
Carlsberg that it too owns more than
5% of the share capital.
SHAREHOLDER RETURN
The Carlsberg Group’s dividend policy
stipulates an adjusted payout ratio of
around 50%. In addition, the
INVESTOR RELATIONS
The Carlsberg Group aims to give
shareholders and the market the
best possible insight into factors
considered relevant for ensuring
market-efficient and fair pricing of
the Company’s shares. This is
achieved through the quality,
consistency and continuity of the
information provided to the market,
which is handled by the Group’s
Investor Relations department.
We observe a four-week silent
period prior to the publication of the
160
140
120
100
80
n
a
J
b
e
F
r
a
M
r
p
A
y
a
M
n
u
J
l
u
J
g
u
A
p
e
S
t
c
O
v
o
N
c
e
D
Carl B
OMXC20
Other
26%
DK
16%
UK
17%
US
41%
Share information
Share class
Number of issued shares¹
Number of issued shares,
excl. treasury shares¹
Carlsberg Foundation
Votes per share
Par value
Share price, year-end
A
B
Total
33,699,252 118,857,554 152,556,806
33,699,252 114,297,159 147,996,411
33,061,264
11,832,140
44,893,404
20
2
DKK 20
DKK 20
DKK 956.0
DKK 993.8
Proposed dividend per share
DKK 21.0
DKK 21.0
¹ At 31 December 2019.
GROUP WEBSITE
www.carlsberggroup.com provides
comprehensive information about
the Group and its shares and bonds,
including Company announcements,
annual and quarterly reports, share
prices and financial data, investor
presentations, webcasts and
transcripts, and a financial and
events calendar.
At the end of 2019, a total of 28
brokers had coverage of the
Company. The analysts’ names and
consensus estimates can be found on
the website.
Financial calendar 2020
Event
Annual General Meeting
Q1 trading statement
H1 interim financial
statement
Q3 trading statement
Date
16 March
30 April
13 August
28 October
CARLSBERG GROUP ANNUAL REPORT 2019 FORWARD-LOOKING STATEMENTS
53
Forward-looking statements
FORWARD-LOOKING
STATEMENTS
This Annual Report contains
forward-looking statements,
including statements about the
Group’s sales, revenues, earnings,
spending, margins, cash flow,
inventory, products, actions, plans,
strategies, objectives and guidance
with respect to the Group's future
operating results.
Forward-looking statements include,
without limitation, any statement
that may predict, forecast, indicate
or imply future results, performance
or achievements, and may contain
the words “believe, anticipate,
expect, estimate, intend, plan,
project, will be, will continue, will
result, could, may, might”, or any
variations of such words or other
words with similar meanings.
Any such statements are subject to
risks and uncertainties that could
cause the Group’s actual results to
differ materially from the results
discussed in such forward-looking
statements.
Prospective information is based on
management’s then current
expectations or forecasts. Such
information is subject to the risk that
such expectations or forecasts, or the
assumptions underlying such
expectations or forecasts, may
change.
The Group assumes no obligation to
update any such forward-looking
statements to reflect actual results,
changes in assumptions or changes in
other factors affecting such forward-
looking statements.
Some important risk factors that
could cause the Group’s actual results
to differ materially from those
expressed in its forward-looking
statements include, but are not
limited to: economic and political
uncertainty (including interest rates
and exchange rates), financial and
regulatory developments, demand
for the Group’s products, increasing
industry consolidation, competition
from other breweries, the availability
and pricing of raw materials and
packaging materials, cost of energy,
production- and distribution-related
issues, information technology
failures, breach or unexpected
termination of contracts, market-
driven price reductions, market
acceptance of new products, changes
in consumer preferences, launches of
rival products, stipulation of fair
value in the opening balance sheet of
acquired entities, litigation,
environmental issues and other
unforeseen factors.
New risk factors can arise, and it
may not be possible for manage-
ment to predict all such risk factors,
nor to assess the impact of all such
risk factors on the Group’s business
or the extent to which any individual
risk factor, or combination of factors,
may cause results to differ materially
from those contained in any forward-
looking statement.
Accordingly, forward-looking
statements should not be relied on
as a prediction of actual results.
Consolidated financial statements
CONSOLIDATED
FINANCIAL STATEMENTS
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
54
CONSOLIDATED FINANCIAL
STATEMENTS
Income statement ................................... 55
Statement of comprehensive
income ......................................................... 55
Statement of financial position ......... 56
Statement of changes in equity ........ 57
Statement of cash flows ...................... 58
Notes ............................................................ 59
PARENT COMPANY FINANCIAL
STATEMENTS
Statements .............................................. 123
Notes ......................................................... 126
REPORTS
Management statement ................... 133
Auditor’s report ..................................... 134
SECTION 1
OPERATING ACTIVITIES
1.1 Segmentation of operations ..................61
1.2 Operating expenses, inventories
and deposit liabilities ................................64
1.3 Foreign exchange risk related to
earnings ........................................................66
1.4 Cash flow from operating
activities ........................................................67
1.5 Trade receivables and on-trade
loans ..............................................................68
SECTION 2
ASSET BASE AND RETURNS
2.1 Segmentation of assets and
returns ...........................................................71
Impairment ..................................................72
2.2
2.3 Intangible assets and property,
plant and equipment ................................78
SECTION 3
SPECIAL ITEMS AND PROVISIONS
3.1 Special items ...............................................82
3.2 Provisions .....................................................83
3.3 Contingent liabilities .................................84
SECTION 4
FINANCING COSTS, CAPITAL
STRUCTURE AND EQUITY
4.1 Financial income and expenses ............86
4.2 Net interest-bearing debt .......................87
4.3 Capital structure ........................................87
4.4 Borrowings and cash................................90
Interest rate risk .........................................91
4.5
4.6 Foreign exchange risk related to
net investments and financing
activities ........................................................92
4.7 Liquidity risk ................................................94
4.8 Derivative financial instruments............96
SECTION 5
ACQUISITIONS, DISPOSALS,
ASSOCIATES AND JOINT VENTURES
5.1
Investment model and risks ...................98
5.2 Acquisitions and disposals ......................99
5.3 Contingent considerations ................... 101
5.4 Associates and joint ventures ............. 102
SECTION 6
TAX
Income tax ................................................ 103
6.1
6.2 Tax assets and liabilities ...................... 104
SECTION 7
STAFF COSTS AND REMUNERATION
7.1 Staff costs ................................................. 106
7.2 Remuneration .......................................... 107
7.3 Share-based payments ........................ 107
7.4 Retirement benefit obligations
and similar obligations ......................... 109
SECTION 8
OTHER DISCLOSURE REQUIREMENTS
8.1 Earnings per share ................................. 112
8.2 Fees to auditors ...................................... 113
8.3 Related parties ........................................ 113
8.4 Events after the reporting period ...... 113
SECTION 9
BASIS FOR PREPARATION
9.1 Significant accounting estimates
and judgements ...................................... 114
9.2 General accounting policies ................ 114
9.3 Changes in accounting policies .......... 117
9.4 New legislation ....................................... 118
SECTION 10
GROUP COMPANIES
10 Group companies.................................... 119
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
55
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
DKK million
Revenue
Cost of sales
Gross profit
Sales and distribution expenses
Administrative expenses
Other operating activities, net
Share of profit after tax of associates and joint ventures
Operating profit before special items
Special items, net
Financial income
Financial expenses
Profit before tax
Income tax
Consolidated profit
Attributable to
Non-controlling interests
Shareholders in Carlsberg A/S (net profit)
DKK
Earnings per share
Earnings per share of DKK 20
Diluted earnings per share of DKK 20
Section
1.1
1.2.1
2019
65,902
-33,264
32,638
2018
DKK million
62,503
Consolidated profit
-31,283
31,220
Other comprehensive income
1.2.3
-17,826
-17,474
Retirement benefit obligations
-4,733
-4,615
Share of other comprehensive income in associates and joint ventures
108
278
10,465
501
360
-1,098
10,228
-2,751
7,477
68
130
Income tax
Items that will not be reclassified to the income statement
9,329
Foreign exchange adjustments of foreign entities
-88
358
Fair value adjustments of hedging instruments
Other
-1,080
Income tax
8,519
-2,386
6,133
Items that may be reclassified to the income statement
Other comprehensive income
Total comprehensive income
Attributable to
908
6,569
824
5,309
Non-controlling interests
Shareholders in Carlsberg A/S
1.2.4
5.4
3.1
4.1
4.1
6.1
1.1
8.1
43.7
43.4
34.8
34.7
Section
2019
7,477
2018
6,133
7.4
5.4
6.1
4.1
4.1
6.1
-571
4
38
-529
3,485
-323
14
17
3,193
2,664
10,141
392
4
-33
363
-2,754
-640
-
85
-3,309
-2,946
3,187
905
9,236
855
2,332
STATEMENT OF FINANCIAL POSITION
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
56
Section 31 Dec. 2019
31 Dec. 2018
DKK million
Section 31 Dec. 2019
31 Dec. 2018
DKK million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in associates and joint ventures
Receivables
Tax assets
Total non-current assets
Current assets
Inventories
Trade receivables
Tax receivables
Other receivables
Prepayments
Cash and cash equivalents
Total current assets
Total assets
2.2, 2.3
2.2, 2.3
5.4
1.5
6.2
69,805
27,886
4,364
1,179
1,938
66,868
25,394
4,562
1,097
1,693
EQUITY AND LIABILITIES
Equity
Share capital
Reserves
Retained earnings
Equity, shareholders in Carlsberg A/S
Non-controlling interests
105,172
99,614
Total equity
1.2.1
1.5
1.5
4.4.2
4,751
5,339
199
1,661
776
5,222
17,948
4,435
5,084
213
1,925
840
5,589
18,086
Non-current liabilities
Borrowings
Retirement benefit obligations and similar obligations
Tax liabilities
Provisions
Other liabilities
4.3.2
3,051
3,051
-33,652
-36,837
74,049
43,448
2,587
46,035
4.2, 4.4.1
20,879
7.4
6.2
3.2
5.3
3,299
6,503
4,037
9,056
79,088
45,302
2,587
47,889
16,750
2,908
5,659
3,827
6,186
Total non-current liabilities
43,774
35,330
123,120
117,700
Current liabilities
Borrowings
Trade payables
Deposits on returnable packaging materials
Provisions
Tax payables
Other liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
4.2, 4.4.1
1.2.2
3.2
4,112
17,149
1,545
1,663
999
7,843
33,311
77,085
7,233
16,199
1,583
1,100
878
7,488
34,481
69,811
123,120
117,700
STATEMENT OF CHANGES IN EQUITY
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
57
DKK million
2019
Equity at 1 January
Consolidated profit
Other comprehensive income
Total comprehensive income for the year
Share-based payments
Dividends paid to shareholders
Share buy-back
Non-controlling interests
Total changes in equity
Equity at 31 December
2018
Equity at 1 January
Consolidated profit
Other comprehensive income
Total comprehensive income for the year
Acquisition/disposal of treasury shares
Settlement of share-based payments
Share-based payments
Dividends paid to shareholders
Non-controlling interests
Disposal of entities
Total changes in equity
Equity at 31 December
Section
Shareholders in Carlsberg A/S
Share
capital
3,051
Currency
translation
Hedging
reserves
Total
reserves
-36,116
-721
-36,837
-
-
-
-
-
-
-
-
-
3,185
3,185
-
-
-
-
3,185
-
-
-
-
-
-
-
-
-
3,185
3,185
-
-
-
-
3,185
Retained
earnings
79,088
6,569
-518
6,051
214
-2,738
-4,100
-4,466
-5,039
Non-
controlling
interests
Total
Total
equity
45,302
2,587
47,889
6,569
2,667
9,236
214
-2,738
-4,100
-4,466
-1,854
908
-3
905
3
-853
-
-55
-
7,477
2,664
10,141
217
-3,591
-4,100
-4,521
-1,854
3,051
-32,931
-721
-33,652
74,049
43,448
2,587
46,035
3,051
-32,902
-581
-33,483
77,362
46,930
2,595
49,525
-
-
-
-
-
-
-
-
-
-
3,051
-
-3,214
-3,214
-
-140
-140
-
-3,354
-3,354
-
-
-
-
-
-
-
-
-
-
-
-
-3,214
-36,116
-140
-721
-
-
-
-
-
-
-3,354
5,309
377
5,686
44
-94
171
-2,439
-1,642
-
1,726
5,309
-2,977
2,332
44
-94
171
-2,439
-1,642
-
-1,628
45,302
824
31
855
-
-
3
-869
-
3
-8
2,587
6,133
-2,946
3,187
44
-94
174
-3,308
-1,642
3
-1,636
47,889
-36,837
79,088
4.3.3
7.3
4.3.2
4.3.2
4.3.3
4.3.2
4.3.2
7.3
4.3.2
5.2
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
58
STATEMENT OF CASH FLOWS
DKK million
Operating profit before special items
Depreciation, amortisation and impairment losses¹
Section
2.3
Operating profit before depreciation, amortisation and impairment losses¹
Other non-cash items
Change in trade working capital
Change in other working capital
Restructuring costs paid
Interest etc. received
Interest etc. paid
Income tax paid
Cash flow from operating activities
Acquisition of property, plant and equipment and intangible assets
Disposal of property, plant and equipment and intangible assets
Change in on-trade loans
Total operational investments
Free operating cash flow
Acquisition and disposal of subsidiaries, net
Acquisition and disposal of associates and joint ventures, net
Acquisition and disposal of financial investments, net
Change in financial receivables
Dividends received
Total financial investments
Other investments in real estate
Total other activities²
Cash flow from investing activities
Free cash flow
Shareholders in Carlsberg A/S
Share buy-back
Non-controlling interests
External financing
Cash flow from financing activities
Net cash flow
Cash and cash equivalents at 1 January³
1.4
1.4
5.2
5.2
4.3.2
4.3.2
4.3.2
4.4.1
Foreign exchange adjustment of cash and cash equivalents
Cash and cash equivalents at 31 December³
4.4.2
2019
10,465
4,542
15,007
-320
491
634
-445
139
-1,033
-2,234
12,239
-4,588
1,714
50
-2,824
9,415
-
-41
25
-59
626
551
-4
-4
-2,277
9,962
-2,738
-4,100
-2,520
-935
-10,293
-331
5,434
46
5,149
2018
9,329
4,091
13,420
143
1,908
52
-238
153
-1,016
-2,375
12,047
-4,017
254
-192
-3,955
8,092
-974
-1,491
3
-36
572
-1,926
-10
-10
-5,891
6,156
-2,489
-
-1,186
-123
-3,798
2,358
3,120
-44
5,434
1 Impairment losses excluding those reported in special items, cf. section 3.1.
2 Other activities cover real estate, separate from beverage activities.
3 Cash and cash equivalents less bank overdrafts.
SECTION 1
OPERATING
ACTIVITIES
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
59
65.9bn
REVENUE (DKK)
Revenue grew by 5.4%, amounting to
DKK 65,902m (2018: DKK 62,503m). The
revenue growth was positively affected
by the organic growth, the full-year effect of
Cambrew, which was acquired in August 2018,
and a positive currency impact.
Revenue growth (%)
49.5%
GROSS MARGIN
Cost of sales per hl increased by approximately
5%, negatively impacted by higher input costs
and mix as well as by currencies.
The gross margin declined by 50bp to 49.5%
due to the higher input costs, declining volumes
in Russia due to the challenging competitive
environment and the consolidation of
Cambrew, which contributes lower margins
than the Group average.
currency movements and a positive net
acquisition effect.
Operating profit before special items was DKK
10,465m (2018: DKK 9,329m). The 12.2%
increase was driven by organic growth of
10.5%, supported by a positive currency and
net acquisition impact of 1.5% and 0.2%
respectively. Western Europe and Asia
delivered positive operating profit growth, while
the operating profit in Eastern Europe declined.
Operating profit growth (%)
1.2%
3.2%
1.0%
68
66
64
62
60
58
56
10.5% 0.2% 1.5%
10.5bn
OPERATING PROFIT (DKK)
Operating expenses excluding distribution
expenses increased by 2%, impacted by
investments in the SAIL’22 priorities. As a
percentage of revenue, operating expenses
declined by 90bp.
Operating profit before depreciation,
amortisation and impairment losses (EBITDA)
grew organically by 10.0%. Reported EBITDA
grew by 11.8% and was impacted by positive
11
10
9
8
7
6
6.6bn
NET PROFIT (DKK)
Special items, net, amounted to DKK 501m
(2018: DKK -88m). Special items were
particularly impacted by the disposal of two
brewery sites and restructuring in Western
Europe.
Financial items, net, amounted to DKK -738m
against DKK -722m in 2018. Excluding
currency gains and fair value adjustments,
financial items, net, amounted to DKK -650m
(2018: DKK -758m).
Tax amounted to DKK -2,751m (2018: DKK
-2,386m). The effective tax rate was 26.9%
(2018: 28.0%).
Consolidated profit was DKK 7,477m
compared to DKK 6,133m in 2018.
Consolidated profit was driven by operating
profit growth, positive special items and a
lower effective tax rate compared with 2018.
Non-controlling interests’ share of consolidated
profit totalled DKK 908m (2018: DKK 824m).
The Carlsberg Group’s share of consolidated
profit was DKK 6,569m (2018: DKK 5,309m).
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
60
cash flow from financing activities, which is not
part of free cash flow.
Free cash flow (DKKbn)
10
8
6
4
2
0
Free operating cash flow
Free cash flow
41.0
EARNINGS PER SHARE (DKK)
Earnings per share were DKK 43.7 (2018: DKK
34.8). Adjusted for special items after tax,
earnings per share were DKK 41.0 (2018: DKK
35.2), corresponding to a 16.5% improvement.
Earnings per share, adjusted, increased by DKK
5.3 due to an increase in earnings and by DKK
0.5 due to the share buy-back programme
initiated in 2019. Excluding share buy-back,
earnings per share, adjusted, increased by 15%.
Earnings per share (DKK)
50
40
30
20
10
0
-10
-20
EPS
EPS-A
12.2bn
OPERATING CASH FLOW (DKK)
Cash flow from operating activities increased
by 1.0% compared with 2018 and amounted to
DKK 12,239m (2018: DKK 12,047m).
The strong operating cash flow was positively
impacted by the change in trade working
capital of DKK +491m (2018: DKK +1,908m).
Average trade working capital to revenue
improved from -16.0% in 2018 to -16.8%. The
change in other working capital was DKK
+634m (2018: DKK +52m), impacted by
provisions, VAT and other accruals.
Restructuring costs paid amounted to DKK
-445m (2018: DKK -238m). Net interest etc.
paid amounted to DKK -894m (2018: DKK
-863m). The increase in interest paid was due
to settlement of financial instruments as well
as lower interest income.
Income tax paid was DKK -2,234m (2018:
DKK -2,375m). The decrease from 2018 was
due to a lower effective tax rate.
10.0bn
FREE CASH FLOW (DKK)
Free cash flow amounted to DKK 9,962m
(2018: DKK 6,156m), while the free operating
cash flow amounted to DKK 9,415m (2018:
DKK 8,092m).
The free cash flow was sustained at a high
level and was positively affected by a higher
EBITDA than in 2018 as well as a positive
impact from working capital.
Cash flow from investing activities was DKK
-2,277m against DKK -5,891m in 2018, an
improvement of DKK 3,614m, due to the
disposal of two brewery sites in Western
Europe and lower cost of acquisition of entities.
Operational investments totalled DKK -2,824m
(2018: DKK -3,955m). Total financial
investments amounted to DKK +551m (2018:
DKK -1,926m), the negative amount in 2018
reflecting the acquisitions of Cambrew and
Super Bock.
Cash flow from real estate activities amounted
to DKK -4m (2018: DKK -10m).
Total cash flow to investments in entities,
including acquisition of non-controlling
interests, i.e. acquiring additional shareholding
in a subsidiary, amounted to DKK 1.7bn (2018:
DKK 2.8bn). For 2019, this primarily included
the acquisition of the remaining 25% of the
Cambrew Group, which was included in
financing activities. Cash flow to acquisition of
non-controlling interests is presented as part of
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
61
Western
Europe
Asia
36,317
18,416
-30,320
-14,536
190
6,187
51
3,931
Eastern
Europe
11,097
-9,215
-
1,882
17.0%
21.3%
17.0%
Western
Europe
36,151
Asia
15,530
-30,847
-12,293
121
5,425
-73
3,164
Eastern
Europe
10,780
-8,558
-
15.0%
20.4%
20.6%
Not
allocated
Beverages,
total
Non-
beverage
Carlsberg
Group, total
72
65,902
-1,543
-55,614
-5
-1,476
236
10,524
568
-728
10,364
-2,766
7,598
16.0%
-
-101
42
-59
-67
-10
-136
15
-121
65,902
-55,715
278
10,465
501
-738
10,228
-2,751
7,477
15.9%
Not
allocated
Beverages,
total
Non-
beverage
Carlsberg
Group, total
42
62,503
-1,489
-53,187
4
2,222
-1,443
-
-117
78
-39
-
-4
-43
9
-34
62,503
-53,304
130
9,329
-88
-722
8,519
-2,386
6,133
14.9%
52
9,368
-88
-718
8,562
-2,395
6,167
15.0%
SECTION 1.1
SEGMENTATION OF
OPERATIONS
REVENUE
The Group’s revenue arises primarily from the
sale of beverages to our customers. Revenue
from brand licensing, sale of by-products and
other revenue in aggregate accounts for around
3% of the Group’s revenue and is not considered
material. Revenue grew by DKK 3,399m in
2019 and was positively impacted by the
increase in volumes, an improved price/mix
across the regions, a positive currency impact
and the full-year effect of Cambrew, which
was acquired in August 2018.
Not allocated revenue, DKK 72m (2018: DKK
42m), consisted of DKK 1,355m (2018: DKK
1,362m) in revenue and DKK -1,283m (2018:
DKK -1,320m) from eliminations of sales
between the geographical segments.
The DKK value of revenue in Russia for 2019
was impacted by the increase in the average
RUB/DKK rate of 2.6%.
Segmentation of income statement
DKK million
2019
Revenue
Total cost
Share of profit after tax of associates and joint ventures
Operating profit before special items
Special items, net
Financial items, net
Profit before tax
Income tax
Consolidated profit
Operating margin
2018
Revenue
Total cost
Share of profit after tax of associates and joint ventures
Operating profit before special items
Special items, net
Financial items, net
Profit before tax
Income tax
Consolidated profit
Operating margin
Geographical allocation of revenue
Revenue and excise duties
DKK million
Revenue including
excise duties
Excise duties
Revenue
2019
2018
DKK million
Denmark (Carlsberg
A/S’ domicile)
93,483
-27,581
65,902
88,970
China
Russia
-26,467
Other countries
62,503
Total
2019
2018
4,736
8,999
7,307
44,860
65,902
4,614
7,509
7,507
42,873
62,503
SECTION 1.1 (CONTINUED)
SEGMENTATION OF
OPERATIONS
OPERATING PROFIT BEFORE
SPECIAL ITEMS
Not allocated operating profit before special
items, DKK -1,476m (2018: DKK -1,443m),
related to central costs not managed by the
regions, including costs of developing branding
activities to support the SAIL’22 initiatives and
general costs of centralised functions as well as
various eliminations of DKK 71m (2018: DKK
73m).
VOLUMES
Organic growth in total volumes was impacted
by 6.0% growth in Asia, which was partly offset
by declining volumes in Western Europe and
Eastern Europe. Reported volume growth was
also driven by Asia, where the acquisition of
Cambrew had a positive impact.
NON-CONTROLLING INTERESTS
The Group’s non-controlling interests consist of
Lao Brewery, Chongqing Brewery Group,
Carlsberg Malaysia Group and other minor
interests, primarily in the Asia region. The non-
controlling interest are not individually material
to the Group’s total profit.
Group financial performance
Volumes (million hl)
Beer
Non-beer
Total volume
DKK million
Revenue
2018
112.3
20.8
133.1
62,503
Operating profit before special items
9,329
Operating margin (%)
14.9
Change
Change
Organic
Acq., net
FX
2019
Reported
-0.6%
3.9%
0.1%
3.2%
10.5%
0.8%
4.1%
1.3%
1.0%
0.2%
-
-
-
112.5
22.4
134.9
0.2%
8.0%
1.4%
1.2%
1.5%
65,902
10,465
15.9
5.4%
12.2%
100bp
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
62
Whether the Group is acting as a principal or an agent
is evaluated by management on a country-by-
country basis. The Group has concluded that it is the
principal in its revenue arrangements because it
controls the goods before transferring them to the
customer.
Excise duties, taxes and fees
The classification of duties, taxes and fees paid to
local authorities or brewery organisations etc.
requires accounting estimates and judgements to be
made by management.
Locally imposed duties, taxes and fees are typically
based on product type, alcohol content, consumption
of certain raw materials, such as glue, plastic or
metal in caps, and energy consumption. These are
classified as either sales- or production-related.
Excise duties are generally imposed by the tax
authorities as taxes on consumption and are collected
by the Group on behalf of the authorities when the
goods are transferred to the customers and thereby
ready for consumption.
Taxes and fees related to the input/use of goods in
production, distribution etc. are recognised as part of
the cost of the goods or services purchased. The type
of authority or organisation imposing the duty, tax or
fee and the objective of these are key factors when
determining the classification.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The Group considers all terms and activities in
contracts with customers in order to determine the
performance obligation, the transaction price and the
allocation of the transaction price.
If the consideration in a contract includes a variable
amount, the Group estimates the consideration to
which it will be entitled in exchange for transferring
goods to the customer. The variable consideration is
estimated at contract inception based on expected
sales volumes using historical and year-to-date sales
data and other information about trading with the
individual customer or with a group of customers.
The Group estimates discounts using either the
expected value method or the most likely amount
method, depending on which method better predicts
the amount of consideration to which it will be
entitled.
The most likely amount method is used for contracts
with a single contract sum, while the expected value
method is used for contracts with more than one
threshold due to the complexity and the activities
agreed with the individual customer.
Certain contracts related to specific major events that
are held within such a short time period that it is not
possible to sell all the goods during the event (e.g.
football matches) give the customer the right to
return the goods within a specified period.
The Group uses the expected value method to
estimate the goods that will not be returned, as this
method best predicts the amount of variable
consideration to which the Group will be entitled. For
goods that are expected to be returned, the Group
recognises a refund liability instead of revenue.
Management makes judgements when deciding
whether supporting activities with a customer should
be classified as a discount or a marketing expense.
Generally, activities with the individual customer are
accounted for as a discount, whereas costs related to
broader marketing activities are classified as
marketing expenses.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
63
Reported figures
Reported figures are analysed by looking at the
impact of organic growth, net acquisitions and foreign
exchange effects.
The net acquisition effect is calculated as the effect of
acquisitions and divestments, including any share
obtained from an increase/decrease in ownership of
associates and joint ventures, for a 12-month period
from the acquisition/divestment date.
The foreign exchange effect is calculated as the
difference between the figures for the current
reporting period translated at the current exchange
rates and at the exchange rates applied in the
previous reporting period.
Organic growth is the remaining growth that is not
related to acquisitions, divestments or foreign
exchange effects.
SECTION 1.1 (CONTINUED)
SEGMENTATION OF
OPERATIONS
ACCOUNTING
POLICIES
Revenue
Presentation
Compared with the Annual Report for 2018, the
Group has, for clarity, changed the name of the line
item “Net revenue” to “Revenue”. Likewise, “Gross
revenue” has been changed to “Revenue including
excise duties”, and the specification has been moved
from the income statement to the notes. The
changed presentation had no impact on the
recognition and measurement of revenue in 2019 and
2018.
Recognition and measurement
Revenue from contracts with customers comprises
sales of goods, royalty income, rental income from
non-stationary equipment, service fees and sales of
by-products.
Revenue from the sale of own-produced finished
goods, goods for resale (third-party products) and
by-products is recognised at the point in time when
the control of goods and products is transferred to
the customer, which is generally upon delivery. For
contracts providing the customer with a right of return
within a specified period, the Group considers the
timing of recognition.
Royalty and licence fees are recognised when earned
according to the terms of the licence agreements.
Revenue from contracts with customers is measured
at an amount that reflects the expected consideration
for those goods. Amounts disclosed as revenue
exclude discounts, VAT and excise duties collected on
behalf of authorities.
The Group considers whether contracts include
separate performance obligations to which a portion
of the transaction price needs to be allocated. In
determining the transaction price, the Group considers
the effects of variable consideration. No element of
financing is deemed present, as payment is generally
made on the basis of cash on delivery or up to 30
days of credit.
Variable consideration
The Group offers various discounts depending on the
nature of the customer and business.
Discounts comprise off-invoice discounts, volume- and
activity-related discounts, including specific promotion
prices offered, and other discounts. Furthermore,
discounts include the difference between the present
value and the nominal amount of on-trade loans to
customers, cf. section 1.5.
Segment information
The Group’s beverage activities are segmented
according to the three geographical regions where
sales take place. These regions make up the Group’s
reportable segments.
The segmentation reflects the geographical and
strategic management, decision and reporting
structure applied by the Executive Committee for
monitoring the Group’s strategic and financial targets.
Segments are managed based on business
performance measured as operating profit before
special items.
Not allocated comprises income and expenses
incurred for ongoing support of the Group’s overall
operations and strategic development. The expenses
include costs of running central functions and
marketing, including global sponsorships.
Off-invoice discounts arise from sales transactions
where the customer immediately receives a reduction
in the sales price. This also includes cash discounts
and incentives for early payments.
The non-beverage segment, comprising research and
real estate activities, is managed separately and
therefore shown separately instead of geographically
segmented.
Volume- and activity-related discounts is a broad
term covering incentives for customers to sustain
business with the Group over a longer time and may
be related to a current campaign or a sales target
measured in volumes or total value. Examples include
discounts paid as a lump sum, discounts for meeting
certain sales targets or progressive discounts offered
in step with increasing sales to a customer.
Other discounts include listing fees, i.e. fees for
certain listings on shelves, in coolers or in favourable
store locations, as such specific promotions are
closely related to the volumes sold.
The geographical allocation of revenue and non-
current assets is based on the selling entities’ domicile
and comprises countries individually accounting for
more than 10% of the Group’s consolidated revenue
as well as the domicile country.
Decisions on restructuring, acquisition and divestment
of entities included in special items as well as on
financing (financial income and expenses) and tax
planning (income tax) are made based on information
for the Group as a whole and therefore not
segmented.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
64
SECTION 1.2
OPERATING
EXPENSES,
INVENTORIES AND
DEPOSIT LIABILITIES
Inventories
DKK million
Raw materials
Work in progress
Finished goods
Total
2019
2,116
333
2,302
4,751
2018
1,891
308
2,236
4,435
1.2.1 COST OF SALES AND INVENTORIES
Cost of sales increased by 6% and was affected
by the organic increase in volume in Asia (6%),
higher input prices, in particular in Eastern
Europe, and the full-year impact from
Cambrew, which was acquired in August 2018.
Cost of sales per hl increased by approximately
5% compared with 2018.
Commodity risks are associated in particular
with purchasing of cans (aluminium), malt
(barley), glass, paper, sugar and energy. The
management of commodity risks is coordinated
centrally and aimed at achieving stable and
predictable prices in the medium term and
avoiding capital and liquidity being tied up
unnecessarily.
later than at the end of the third quarter of the
previous year and to hedge up to around 90%
at the beginning of the year. A significant part
of the exposure for the Group for 2019 was
therefore hedged through fixed-price purchase
agreements entered into during 2018. Likewise,
the majority of the exposure for 2020 was
hedged during 2019. The percentage that is
hedged or at fixed prices is higher for Western
Europe and Eastern Europe than for Asia,
which is partly due to the timing of the harvest
season in this region.
In the majority of purchase agreements for
cans, the Group’s purchase price is variable and
based on the global market price of aluminium
(London Metal Exchange, LME). The Group
is thereby able to hedge the underlying
aluminium price risk by applying a hedge ratio
of 1:1.
Cost of sales
DKK million
Cost of materials
Direct staff costs
Amortisation and
depreciation
Indirect production
overheads
Purchased finished goods
and other costs
Total
2019
19,222
1,441
2018
17,252
1,365
2,637
2,849
4,433
4,191
5,531
33,264
5,626
31,283
Inventories increased by 7% compared with
2018, mainly impacted by higher inventories in
Eastern Europe due to bottle stocking and
lower sales.
As the underlying markets for the specified
categories vary, so does the way in which they
are hedged against price increases.
The most common form of hedging is fixed-
price purchase agreements in local currencies
with suppliers.
It is Group policy to fix the prices of 70% of
malt (barley) purchases for a given year no
In 2019, the majority of the aluminium price
risk was hedged with financial instruments or
with fixed prices via the suppliers to the Group.
The same has been done for 2020. The fair
values of the financial instruments are specified
in section 4.8.
Hedging of raw material price risk
DKK million
2019
Aluminium
2018
Aluminium
Sensitivity assuming
100% efficiency
Time of maturity
Change
+10%
Effect
on OCI
Tonnes
purchased
Average
price (DKK)
2020
77
63,861
12,512
63,861
2021
-
+10%
112
93,296
13,095
71,531
21,765
2019
2020
ACCOUNTING ESTIMATES
AND JUDGEMENTS
At least once a year, management assesses whether
the standard cost of inventories approximates the
actual cost. During the year, the standard cost is
revised if it deviates by more than 5% from the actual
cost. Indirect production overheads are calculated on
the basis of relevant assumptions as to capacity
utilisation, production time and other factors.
Management also assesses the impact on the
standard cost of government and other grants
received to fund operating activities. This includes
assessing the terms and conditions of grants received
and the risk of any repayment.
The calculation of the net realisable value of
inventories is relevant to packaging materials, point-
of-sale materials and spare parts. The net realisable
value is normally not calculated for beer and soft
drinks due to their limited shelf-life, which means
that slow-moving goods must be scrapped instead.
ACCOUNTING
POLICIES
Cost of sales comprises cost of materials used in
own-produced finished goods, including malt
(barley), hops, glass, cans, other packaging materials,
direct labour, indirect production overheads and
standard cost variations. Further, it comprises
purchased finished goods that include cost of point-
of-sale materials and third-party products sold to
customers.
Indirect production overheads comprise indirect
supplies, wages and salaries, amortisation of brands
and software, as well as maintenance and
depreciation of machinery, plant and equipment used
for production.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
65
SECTION 1.2 (CONTINUED)
OPERATING
EXPENSES,
INVENTORIES AND
DEPOSIT LIABILITIES
The cost of purchased finished goods, raw and
packaging materials and point-of-sale materials
includes the purchase cost and costs directly related
to bringing inventories to the relevant place of sale
and getting them ready for sale, for example
insurance, freight and duties.
Inventories are measured at the lower of standard
cost (own-produced finished goods) and weighted
average cost (other inventories), or net realisable
value. The net realisable value is the estimated selling
price less costs of completion and costs necessary to
make the sale, also taking into account marketability,
obsolescence and developments in expected selling
price.
The cost of scrapped/impaired goods is expensed in
the function (line item) responsible for the loss, i.e.
losses during distribution are included in distribution
expenses, while scrapping of products due to sales
not meeting forecasts is included in sales expenses.
1.2.2 DEPOSITS ON RETURNABLE
PACKAGING MATERIALS
Deposits on returnable packaging materials
amounted to DKK 1,545m (2018: DKK
1,583m). The capitalised value of returnable
packaging materials was DKK 2,102m (2018:
DKK 1,898m).
The capitalised value of returnable packaging
materials exceeds the deposits because each of
the returnable packaging items circulates a
number of times in the market and some
markets have regulations that require the
deposit value to be set lower than the cost of
the returnable packaging materials.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Management assesses the local business model to
determine whether the Group has a legal or
constructive obligation to accept returns of packaging
materials from the market and the level of control.
This entails the Group considering, among other
things, the return rate and the annual circulation in
the individual markets. These factors are assessed
annually. Returnable packaging materials controlled
by the Group are capitalised as property, plant and
equipment and are depreciated over the expected
useful life.
The deposit on returnable packaging materials is
estimated based on movements during the year in
recognised liabilities, loss of returnable packaging
materials in the market, planned changes in
packaging types and historical information about
return rates.
ACCOUNTING
POLICIES
Returnable packaging materials that the Group
controls through a legal or constructive obligation are
capitalised as property, plant and equipment.
1.2.3 SALES AND DISTRIBUTION
EXPENSES
Total expenses increased by 2% in reported
terms and were flat organically. The reported
figure was impacted by higher marketing
expenses related to investments in the SAIL’22
priorities, while sales and distribution expenses,
net, were flat compared with 2018.
Sales and distribution expenses
DKK million
Marketing expenses
Sales expenses
Distribution expenses
Total
2019
5,581
5,768
6,477
17,826
2018
5,345
5,849
6,280
17,474
ACCOUNTING
POLICIES
Marketing expenses consist of expenses for brand
marketing and trade marketing.
Brand marketing is an investment in the Group’s
brands and consists of brand-specific investments in
the development of communication vehicles, the use
of these to drive the sale of branded products, sales
campaigns and sponsorships.
Returnable packaging materials are depreciated over
3-10 years. The accounting policies for property,
plant and equipment are further described in section
2.3.
Trade marketing is promotional activities directed
towards customers, such as the supply of point-of-
sale materials, promotional materials and trade
offers.
The obligation to refund deposits on returnable
packaging materials is measured on the basis of
deposit price, an estimate of the number of bottles,
kegs, cans and crates in circulation, and expected
return rates.
Sales expenses comprise costs relating to general
sales activities, write-downs for bad debt losses,
wages and salaries as well as depreciation and
impairment of sales equipment. Distribution expenses
comprise costs incurred in distributing goods, wages
and salaries, and depreciation and impairment of
distribution equipment.
1.2.4 OTHER OPERATING
ACTIVITIES, NET
Other operating activities are secondary to the
principal activities of the Group and include
income and expenses relating to rental
properties, restaurants, on-trade loans,
research activities, and gains and losses on
disposal of intangible assets and property,
plant and equipment.
Other operating activities, net
DKK million
2019
2018
Gains and losses on disposal
of property, plant and
equipment and intangible
assets, net
On-trade loans, net
Real estate, net
Research centres, net
Other, net
Total
ACCOUNTING
POLICIES
56
44
11
-133
130
108
13
21
-15
-127
176
68
Gains and losses on disposal of intangible assets and
property, plant and equipment are determined as the
sales price less selling costs and the carrying amount
at the disposal date.
On-trade loans, net, comprise the effective interest
on the loans measured at amortised cost less
impairment.
Expenses relating to research activities comprise
research in Denmark and France less funding received
from the Carlsberg Foundation for the operation of
the Carlsberg Research Laboratory and grants
received to fund research. The funding and grants are
recognised in the income statement in the same
period as the activities to which they relate. Product
development costs are included in cost of sales.
Asia
The transaction risk is considered to be less
significant due to the lower sales and
purchases in currencies other than the local
functional currencies as well as the high
correlation between USD and most of the
Asian currencies. As a consequence, the risk is
not hedged.
Eastern Europe
Baltika Breweries and the other entities in
Eastern Europe have expenses in both USD and
EUR, and appreciation of the RUB and other
currencies vis-à-vis EUR and USD has a
positive impact on operating profit, while
depreciation has a negative effect. The Group
has chosen not to systematically hedge the
transaction risk due to the significant cost of
hedging these currencies over a longer period
of time. For 2019 and 2020, the Group has
chosen to hedge a portion of Baltika Breweries’
expenses in USD. The volatility of the Eastern
European currencies will continue to affect
operating profit measured in both DKK and
local currencies.
TRANSLATION RISK
The Group is exposed to risk from translation
of foreign entities into the Group’s presentation
currency, DKK.
SECTION 1.3
FOREIGN EXCHANGE
RISK RELATED TO
EARNINGS
The majority of the Group’s activities take place
outside Denmark and in currencies other than
DKK. Foreign exchange risk is therefore a
principal financial risk for the Group, and
exchange rate fluctuations can have a
significant impact on the income statement.
TRANSACTION RISKS ON PURCHASES
AND SALES
The Group is exposed to transaction risks on
purchases and sales in currencies other than
the local functional currencies. It is the Group’s
intention to hedge 70-90% of future cash flows
in currencies other than the local functional
currency on a four-quarter rolling basis.
Western Europe
For the entities in Western Europe, a major
part of the purchases in foreign currencies is in
EUR. Hedging of EUR against the local
currencies will effectively eliminate a significant
part of the currency risk in the entities’
operating profit in local currency. At Group
level, these hedges are effectively an economic
hedge of (parts of) the revenue in the relevant
currency, and they are accounted for as cash
flow hedges, cf. section 4.8. The EUR/DKK
exposure is considered to be limited and is not
hedged.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
66
The single largest exposure in respect of
operating profit is the exposure to RUB caused
by the high volatility in the currency. The
exposure to fluctuations in EUR/DKK is
considered to be limited due to Denmark’s fixed
exchange rate policy towards EUR and is
consequently not hedged.
The Group has chosen not to hedge the
exposure arising from translation of revenue or
earnings in foreign currencies, but some of the
Group’s debt is denominated in currencies in
which the Group generates significant earnings
and cash flow.
Revenue by functional currency (%)
2019 (2018)
Impact on operating profit
Developments in exchange rates between DKK
and the functional currencies had a positive
impact of 1.5% on operating profit measured in
DKK.
Entities in
The eurozone
Russia
China
United Kingdom
Switzerland
Norway
Sweden
Laos
Functional
currency
Change in average FX
rate 2018 to 2019
EUR
RUB
CNY
GBP
CHF
NOK
SEK
LAK
0.17%
2.60%
1.00%
1.20%
4.00%
-2.50%
-2.90%
2.30%
EUR 19% (20%)
CNY 14% (12%)
RUB 11% (12%)
DKK 10% (10%)
GBP 5% (6%)
CHF 5% (6%)
NOK 5% (6%)
Other 31% (28%)
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
67
Income tax paid amounted to DKK -2,234m
(2018: DKK -2,375m). The decrease in tax
paid was partly due to higher taxes paid in
2018 on the disposal of the former brewery
site in Hamburg, Germany, partly offsetting a
2019 increase in taxes paid on higher earnings
in China.
Cash flow from disposal of property, plant and
equipment and intangible assets, DKK 1,714m,
includes the proceeds from disposal of the
former brewery sites in Trondheim, Norway,
and the release of the prepaid proceeds on the
disposal of the former brewery site in
Hamburg, in total DKK 1,503m.
Average trade working capital improved from
-16.0% to -16.8% of revenue, primarily due to
the increase in trade payables.
SECTION 1.4
CASH FLOW FROM
OPERATING
ACTIVITIES
Change in trade working capital amounted to
DKK 491m (2018: DKK 1,908m) and was
affected by higher trade payables in Asia,
driven by higher volumes in 2019. This was
partly offset by increases in inventories, both in
Asia and Eastern Europe.
The increase in other working capital amounted
to DKK 634m (2018: DKK 52m), affected by
an increase in other payables, mainly in Asia,
as well as a decrease in other receivables in
Western Europe, partly due to VAT receivables.
The change in on-trade loans amounted to
DKK 50m (2018: DKK -192m). On-trade
loans in 2018 were affected by a DKK 238m
reclassification of some prepaid costs to on-
trade loans.
Restructuring costs paid amounted to DKK
-445m (2018: DKK -238m), a large part of
which relates to termination benefits to
employees made redundant due to
optimisation in a number of markets in
Western Europe and Russia, as well as costs
related to the closure of the former brewery
site in Hamburg, Germany.
Net interest etc. paid amounted to DKK -894m
(2018: DKK -863m). The increase in net
interest was affected by settlements of
derivative financial instruments as well as lower
interest income.
Other specifications of cash flow from operating activities
DKK million
Other non-cash items
Section
2019
2018
Share of profit after tax of associates and joint ventures
Gain on disposal of property, plant and equipment and intangible assets, net
Share-based payments
Transfer of long-term medical insurance obligation
5.4
2.3
7.4
Other items
Total
Trade working capital
Inventories
Trade receivables
Trade payables, duties payable and deposits on returnable packaging
materials
Total
Other working capital
Other receivables
Other payables
Retirement benefit obligations and other liabilities related to
operating profit before special items
Unrealised foreign exchange gains/losses
Total
On-trade loans
Loans provided
Repayments
Amortisation of on-trade loans
Total
-278
-130
-56
217
-162
-41
-320
-188
82
597
491
254
268
154
-42
634
-685
426
309
50
-13
174
-
112
143
-586
-423
2,917
1,908
125
-364
338
-47
52
-960
449
319
-192
SECTION 1.5
TRADE RECEIVABLES
AND ON-TRADE
LOANS
The Group’s non-current receivables consist
mainly of on-trade loans that fall due more
than one year from the reporting date. Of the
total non-current receivables, DKK 207m
(2018: DKK 171m) falls due more than five
years from the reporting date.
The carrying amount of receivables
approximates their fair value. For on-trade
loans, the fair value is calculated as discounted
cash flows using the interest rate at the
reporting date.
Credit risk on receivables
DKK million
2019
Receivables from sales of goods and services
Not past due
Overdue 1-30 days
Overdue 31-90 days
Overdue > 90 days
Receivables from sales of goods and services
On-trade loans
Not past due
Overdue 1-30 days
Overdue 31-90 days
Overdue > 90 days
On-trade loans
Other receivables
Not past due
Overdue 1-30 days
Overdue 31-90 days
Overdue > 90 days
Other receivables
Total
Total 2018
Gross
receivables
Loss
allowance
Receivables,
net
Weighted ave-
rage loss rate
4,199
571
271
325
5,366
1,165
54
65
355
1,639
1,638
12
143
93
1,886
8,891
8,760
-101
-26
-47
-303
-477
-52
-5
-13
-144
-214
-2
-
-1
-18
-21
-712
-654
4,098
545
224
22
4,889
1,113
49
52
211
1,425
1,636
12
142
75
1,865
8,179
8,106
2%
5%
17%
93%
4%
9%
20%
41%
-
-
1%
19%
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
68
On-trade loans recognised in other operating
activities, net
DKK million
2019
2018
Interest and amortisation of
on-trade loans
Losses and write-downs on
on-trade loans
On-trade loans, net
75
-31
44
61
-40
21
ON-TRADE LOANS
Under certain circumstances, the Group grants
loans to on-trade customers in France, the UK,
Switzerland, Germany and Sweden. On-trade
loans are spread across a large number of
customers/debtors and consist of several types
of loan, including loans repaid in cash or
through reduced discounts and guarantees for
loans provided by third parties, cf. section 3.3.
The operating entities monitor and control
these loans in accordance with Group
guidelines.
The average effective interest rate on loans to
the on-trade was 4.5% (2018: 3.6%).
Receivables included in the statement of financial position
2019
Receivables from sales of goods and services
On-trade loans
Other receivables
Total
2018
Receivables from sales of goods and services
On-trade loans
Other receivables
Total
Current
4,889
450
1,661
7,000
Current
4,605
479
1,925
7,009
Non-
current
-
975
204
1,179
Non-
current
-
972
125
1,097
Total
4,889
1,425
1,865
8,179
Total
4,605
1,451
2,050
8,106
Receivables from sales of goods and
services and on-trade loans (Broken
down by country)
2019 (2018)
France 13% (14%)
Switzerland 9% (7%)
UK 7% (9%)
Poland 2% (5%)
Russia 11% (11%)
Sweden 8% (4%)
Germany 7% (8%)
Other 43% (42%)
SECTION 1.5 (CONTINUED)
TRADE RECEIVABLES
AND ON-TRADE
LOANS
1.5.1 CREDIT RISK
In 2019, receivables not past due amounts to
84% (2018: 87%) of total receivables, net.
The impairment losses generally relate to
minor customers that are not expected to be
able to pay their outstanding balances, mainly
due to adverse economic developments.
The distribution of receivables broken down by
country is affected by market-specific changes
in payment patterns and in the amounts of
receivables sold. The overall level of receivables
sold is similar to last year. Furthermore,
translated into DKK, the proportionate shares
of the receivables have changed due to
differences in the currencies’ development
against DKK.
Development in impairment losses on receivables
DKK million
2019
Impairment at 1 January
Impairment losses recognised
Realised impairment losses
Reversed impairment losses
Foreign exchange adjustments
Impairment at 31 December
Receivables
from sales of
goods and
services¹
-426
-129
58
47
-27
-477
On-trade
loans²
Other
receivables²
-221
-41
39
10
-1
-7
-17
-
-
3
-214
-21
Total
-654
-187
97
57
-25
-712
2018
Total
-794
-190
140
161
29
-654
1 Lifetime expected credit loss.
2 12-month expected credit loss, except for an insignificant share that is a lifetime expected credit loss.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
69
ACCOUNTING ESTIMATES
AND JUDGEMENTS
On-trade loan agreements are complex, cover several
aspects of the customer relationship and may vary
from agreement to agreement. Management
assesses the recognition and classification of income
and expenses for each agreement, including the
allocation of payments from the customer between
revenue, discounts, interest (other operating activities)
and repayment of the loan.
Management also assesses both individually and on a
portfolio basis whether developments in local
conditions for on-trade customers could impact the
expected credit losses.
Exposure to credit risk on receivables is managed
locally, and credit limits are set as deemed
appropriate for the customer, taking into account the
current local market conditions.
The local entities assess the credit risk and adhere to
Group guidelines, which include setting credit limits,
encouraging cash payment, purchasing credit
insurance and taking collateral.
In assessing credit risk, management analyses the
need for impairment of trade receivables and on-
trade loans due to customers’ inability to pay.
Management assesses the expected credit losses
(ECL) for portfolios of receivables based on customer
segments, historical information on payment
patterns, terms of payment, concentration maturity,
and information about the general economic situation
in the countries. The portfolios are based on on-trade
and off-trade customers, and on-trade receivables
and loans.
On-trade loans carry a higher risk than trade
receivables and are concentrated in a few markets.
The local entities manage and control these loans in
accordance with Group guidelines.
The credit risk on on-trade loans can be reduced
through collateral and pledges of on-trade movables
(equipment in bars, cafés etc.). The fair value of the
pledged on-trade movables cannot be estimated
reliably but is assessed to be insignificant, as the
movables cannot readily be used again.
ACCOUNTING
POLICIES
Receivables are recognised initially at fair value and
subsequently measured at amortised cost less loss
allowance or impairment losses. Trade receivables
comprise sale of goods and services as well as short-
term on-trade loans to customers. Other receivables
comprise VAT receivables, loans to partners,
associates and joint ventures, interest receivables and
other financial receivables.
Regarding the on-trade loans, any difference
between the present value and the nominal amount
at inception is treated as a prepaid discount to the
customer, and is recognised in the income statement
in accordance with the terms of the agreement.
The market interest rate is used as the discount rate,
corresponding to the money market rate based on
the maturity of the loan with the addition of a risk
premium. The effective interest on these loans is
recognised in other operating activities, net. The
amortisation of the difference between the discount
rate and the effective interest rate is included as a
discount in revenue.
The Group applies the simplified approach to measure
expected credit losses. This entails recognising a
lifetime expected loss allowance for all trade
receivables. Loss rates are determined based on
grouping of trade receivables sharing the same credit
risk characteristics and past due days.
Regarding on-trade loans and loans to associates, a
loss allowance is recognised based on 12-month or
lifetime expected credit losses, depending on whether
a significant increase in credit risk has arisen since
initial recognition.
SECTION 2
ASSET BASE
AND RETURNS
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
70
123.1bn
TOTAL ASSETS (DKK)
Total assets increased by DKK 5.4bn, mainly
due to an increase in intangible assets and
property, plant and equipment. Intangible assets
amounted to DKK 69.8bn at 31 December 2019
(2018: DKK 66.9bn), impacted among other
things by the appreciation of the Russian rouble.
Property, plant and equipment increased by
DKK 2.5bn to DKK 27.9bn (2018: DKK
25.4bn), mainly impacted by the capitalisation
of right-of-use assets on implementation of
IFRS 16 and currencies.
Asset base1 (DKKm)
Current assets decreased by DKK 0.1bn to DKK
17.9bn. The slight decline was due to lower
receivables and cash, while inventories
increased by DKK 0.3bn, mainly impacted by
bottle stocking and lower sales in Eastern
Europe.
4.6bn
CAPEX (DKK)
CapEx included finalisation of the new
greenfield brewery in Germany, the new central
office in Copenhagen, enhancement of craft
production sites in China and Denmark, and
sustainability investments such as Snap Pack
and total water management. The increase in
CapEx led to an increase in the ratio of CapEx
to amortisation and depreciation excluding
right-of-use assets to 111% (2018: 98%).
CapEx increased across all regions, with Asia as
main contributor. Besides the craft production
site in China, the increase in Asia was mainly
due to an increase in returnables to support
growth initiatives across the region as well as
capacity expansions including DraughtMaster
lines in China and sales equipment in
Cambodia.
CapEx and amortisation/
depreciation (DKKbn)
8.8%
ROIC
Return on invested capital (ROIC) increased by
70bp to 8.8%, impacted by a higher operating
profit and a lower effective tax rate. ROIC
excluding goodwill increased by 130bp to
22.2%, with improvements mainly achieved in
Asia.
Return on invested capital (ROIC) (%)
92,262
1,592
4,795
3,681
-4,512
-127
97,691
5.0
4.0
3.0
2.0
1.0
7.0%
6.0%
5.0%
4.0%
3.0%
24
20
16
12
8
4
1 The asset base represents the total investment in intangible assets and property, plant and equipment.
CapEx
Amortisation and depreciation
CapEx/revenue
ROIC
ROIC excl. goodwill
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
71
SECTION 2.1
SEGMENTATION OF
ASSETS AND
RETURNS
At year-end, invested capital was up by
DKK 3.5bn, affected by an increase in assets
included of DKK 5.8bn, which was primarily
driven by the appreciation of the Russian
rouble as well as additions of right-of-use
assets. The increase was partially offset by
higher trade payables.
The impact on total assets from fluctuations in
the Russian rouble was an increase of DKK
4.0bn (2018: decrease of DKK 4.2bn).
Non-current assets comprise intangible assets
and property, plant and equipment owned by
the segment/country, even if the income is
earned outside the segment/country that owns
the asset. Furthermore, they include non-
current financial assets other than financial
instruments and tax assets.
Geographical allocation of non-current assets
ACCOUNTING ESTIMATES
AND JUDGEMENTS
DKK million
Denmark
(Carlsberg A/S'
domicile)
Russia
China
Other countries
Total
2019
2018
3,472
24,518
14,569
59,496
102,055
3,924
21,578
14,152
57,170
96,824
The calculation of return on invested capital (ROIC)
uses operating profit before special items adjusted for
tax using the effective tax rate, and invested capital
including assets held for sale and trade receivables
sold, and excludes contingent considerations and
income tax.
ACCOUNTING
POLICIES
Not allocated comprises supporting companies
without brewing activities and eliminations of
investments in subsidiaries, receivables and
loans.
The Group’s assets and returns are segmented on the
basis of geographical regions in accordance with the
management reporting for the current year, cf.
section 1.1.
Invested capital
DKK million
Total assets
Less
Tax assets
Financial receivables,
hedging instruments and
receivables sold
Cash and cash equivalents
Assets included
Trade payables
Deposits on returnable
packaging materials
Provisions, excl.
restructurings
Other liabilities, excl. hedging
instruments
Liabilities offset
Invested capital
Goodwill
Invested capital excl.
goodwill
2019
2018
123,120
117,700
DKK million
-1,938
-1,693
2019
Invested capital
1,899
-5,222
1,660
-5,589
117,859
112,078
-17,149
-16,199
Invested capital excl. goodwill
Acquisition of property, plant and equipment and
intangible assets
Amortisation and depreciation
Impairment losses
Return on invested capital (ROIC)
-1,545
-1,583
ROIC excl. goodwill
-5,389
-4,546
2018
-7,557
-7,029
-31,640
-29,357
86,219
82,721
Invested capital
Invested capital excl. goodwill
Acquisition of property, plant and equipment and
intangible assets
-52,908
-50,929
Amortisation and depreciation
Impairment losses
33,311
31,792
Return on invested capital (ROIC)
Invested capital, average
87,009
82,590
ROIC excl. goodwill
Western
Europe
39,299
18,372
2,100
2,025
42
11.5%
23.7%
Asia
20,521
4,389
1,539
1,450
29
14.2%
63.5%
Eastern
Europe
27,193
11,344
602
710
50
5.8%
13.9%
Not
allocated
Beverages,
total
-2,347
-2,347
84,666
31,758
Non-
beverage
1,553
1,553
330
319
-
-
-
4,571
4,504
121
8.9%
22.9%
21
8
-
-
-
38,254
17,440
21,090
5,040
23,976
9,911
-1,696
-1,696
81,624
30,695
1,097
1,097
1,948
1,725
56
10.8%
24.4%
1,164
1,227
56
11.8%
44.0%
547
667
-45
7.0%
17.1%
347
435
-
-
-
4,006
4,054
67
8.2%
21.4%
21
10
-
-
-
Carlsberg
Group,
total
86,219
33,311
4,592
4,512
121
8.8%
22.2%
82,721
31,792
4,027
4,064
67
8.1%
20.9%
SECTION 2.2
IMPAIRMENT
2.2.1 RECOGNISED IMPAIRMENTS
In 2019 and 2018, the impairment tests of
goodwill and brands with indefinite useful life
were prepared at the reporting date without
this leading to recognition of impairment
losses.
During the year, impairment losses of DKK
124m (2018: DKK 116m) were recognised
relating to two minor brands and to property,
plant and equipment. In 2018, impairment
losses primarily related to steel keg
installations and filling lines in the Nordic
countries, which were impacted by the roll-out
of the DraughtMaster system.
In 2019, the Group recognised reversal of
impairment losses in Eastern Europe of DKK
3m (2018: DKK 49m) relating to assets that
have been brought back into production.
Significant amounts of goodwill and brands
Goodwill and brands with indefinite useful life
relating to Baltika Breweries, Kronenbourg,
Chongqing Brewery Group, and the acquisition
of the 40% non-controlling interest in Carlsberg
Breweries A/S each account for 10% or more
of the total carrying amount of goodwill and
brands with an indefinite useful life at the
reporting date.
Impairment of brands and other non-current assets
DKK million
2019
2018
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
72
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Identification of cash-generating units
The Group’s management structure reflects the
geographical segments, cf. section 1.1, and decisions
are made by the regional managements responsible
for performance, operating investments and growth
initiatives in their respective regions.
There is significant vertical integration of the
production, logistics and sales functions, supporting
and promoting optimisations across the Group or
within regions.
Assets, other than goodwill and brands with regional
and global presence, are allocated to individual cash-
generating units (CGUs), being the level at which the
assets generate largely independent cash inflows. As
the Group operates with local sales and production
organisations, the cash inflows are generated mostly
locally, and the CGUs are therefore usually identified
at country level.
Within 12 months from the date of acquisition, the
determination of CGU allocation is made, and cash
inflows are assessed in connection with the purchase
price allocation.
Goodwill
Goodwill does not generate largely independent cash
inflows on its own and is therefore allocated to the
Group’s geographical segments, which is the level at
which it is monitored for internal management
purposes.
the Group gained control of the Acrospires activities,
and the goodwill recognised on the acquisition was
allocated to the Western Europe CGU. In 2018, the
Group gained control of the Cambrew Group,
Cambodia, and the goodwill recognised on the
acquisition was allocated to the Asia CGU.
Brands
Cash flows for brands are separately identifiable and
are therefore tested individually for impairment. This
test is performed in addition to the test for
impairment of goodwill.
The following brands are considered significant when
comparing their carrying amount with the total
carrying amount of brands with indefinite useful life:
• Baltika brand
• International brands
International brands is a group of brands recognised
in connection with the acquisition of the 40% non-
controlling interest in Carlsberg Breweries A/S and
allocated to Western Europe. The amount is not
allocated to individual brands.
Corporate assets
The Group has identified capitalised software relating
to the Group’s ERP systems as corporate assets, and
as such these are peripheral to the generation of cash
inflow. The Group’s ERP landscape is closely linked to
the internal management structure, and the identified
assets are therefore tested for impairment at the CGU
level to which goodwill is allocated.
Brands and other intangible assets
Brands
Land use rights
Total
Property, plant and equipment
Plant, machinery and equipment
Plant, machinery and equipment (reversal of impairment losses)
Total
Total impairment losses, net
Of which recognised in special items, cf. section 3.1
6
7
13
111
-3
108
121
91
In previous years, goodwill in Asia was allocated to
several CGUs and groups of CGUs that were
considered to be less integrated in the region and
therefore tested separately. In 2019, the composition
of CGUs was changed to follow the Group’s
segments. The change reflects the conclusion of the
integration of significant entities acquired in recent
years, the operating model and the now higher
degree of integration between the markets of the
region than before.
At the time of acquisition of entities, goodwill is
allocated to a CGU, cf. section 5.2. The structure and
groups of CGUs are reassessed every year. In 2019,
-
-
-
116
-49
67
67
40
SECTION 2.2 (CONTINUED)
IMPAIRMENT
Other non-current assets
Other non-current assets are tested for impairment
when indications of impairment exist.
For property, plant and equipment, management
performs an annual assessment of the assets’ future
application, for example in relation to changes in
production structure, restructurings or closing of
breweries.
For investments in associates and joint ventures,
examples of indications of impairment are loss-
making activities or major changes in the business
environment.
ACCOUNTING
POLICIES
Goodwill and brands with indefinite useful life are
subject to an annual impairment test, performed
initially before the end of the year of acquisition.
The test is performed at the level where cash flows
are considered to be generated; either at CGU level or
at the level of a group of CGUs. All assets are tested
if an event or circumstance indicates that the carrying
amount may not be recoverable. If an asset’s carrying
amount exceeds its recoverable amount, an
impairment loss is recognised. The recoverable
amount is the higher of the asset’s fair value less
costs of disposal and its value in use.
For all assets, the value in use is assessed based on
budget and target plan with reference to the expected
future net cash flows. The assessment is based on the
lowest CGU affected by the changes that indicate
impairment. The cash flow is discounted by a
discount rate adjusted for any risk specific to the
asset, if relevant to the applied calculation method.
Impairment losses on goodwill and brands, significant
losses on property, plant and equipment, associates
and joint ventures, and losses arising on significant
restructurings of processes and structural adjustments
are recognised as special items. Minor losses are
recognised in the income statement in the relevant
line item.
Impairment of goodwill is not reversed. Impairment of
other assets is reversed only to the extent of changes
in the assumptions and estimates underlying the
impairment calculation. Impairment is only reversed
to the extent that the asset’s new carrying amount
does not exceed the carrying amount of the asset
after amortisation/depreciation had the asset not
been impaired.
2.2.2 IMPAIRMENT TEST OF GOODWILL
The carrying amount of goodwill
allocated to groups of CGUs
DKK million
Western Europe
Asia
Eastern Europe
Total
2019
20,927
16,132
15,849
2018
20,814
16,050
14,065
52,908
50,929
The estimation of the expected cash flow
involves developing multiple probability-
weighted scenarios to reflect different
outcomes in terms of timing and amount. The
measurement of the forecast period growth
rates reflects risk adjustments made to
calculate the expected cash flows.
Key assumptions
Forecast
cash flow
growth
Terminal
period
growth
Pre-tax
discount
rate
2019
Western
Europe
Asia
Eastern
Europe
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
73
The average cash flow growth in the forecast
period reflects the significant risk adjustments
included in the forecast specifically for the
impairment test. The risk adjustment considers
only negative alternative scenarios to account
for the uncertainty related to the benefits
expected from the strategic initiatives in
SAIL’22 in Western Europe, the development in
beer consumption in Asia, particularly in China,
and the volatile macroeconomic and
competitive situation in Eastern Europe.
Potential upsides are not identified and
adjusted in the cash flows used for impairment
testing. The growth is projected in nominal
terms and therefore does not translate into
cash flow at the same growth rate in the
Group’s presentation currency, DKK.
WESTERN EUROPE
The region primarily comprises mature beer
markets, and market volumes tend to be flat.
In recent years, the region has seen improving
beer category dynamics through innovations,
increased interest in craft & speciality beers and
alcohol-free brews, and an overall improved
category perception.
The region is generally characterised by well-
established retail structures and a strong
tradition of beer consumption. The
consumption is generally resilient but the on-
trade tends to suffer in a weak macroeconomic
environment.
ASIA
The importance of Asia for the Group has
increased significantly over the past decade,
during which the Group has strengthened its
presence in the region, both organically and
through acquisitions.
The Asian markets are very diverse but offer
prospects for volume and value growth,
underpinned by young populations,
urbanisation, rising disposable income levels,
growing economies and, in some markets,
relatively low per capita beer consumption.
However, as many Asian markets are emerging
markets, development is subject to volatility.
Both the on-trade and off-trade channels are
characterised by a strong traditional outlet
segment but with the modern outlet segment
growing in most markets.
The focus in the region is on revenue growth.
Activities include the continued expansion of
our international premium brands, in particular
Tuborg, 1664 Blanc and Carlsberg, and the
strengthening and premiumisation of our local
power brands in combination with a continued
focus on costs and efficiencies.
EASTERN EUROPE
The two main markets in the region are Russia
and Ukraine, which account for around 65%
and 20% respectively of regional beer volumes.
-29%
-2%
0.0%
1.0%
1.6%
4.1%
-5%
4.0%
6.5%
The focus is on improving margins by driving a
positive price/mix development and reducing
the cost base across the value chain. This
process is part of the initiatives in SAIL’22.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
74
Input costs
Input costs in the budget and target plans are based
on past experience and on:
• Contracted raw and packaging materials
• Contracted services within sales, marketing,
production and logistics
• Planned commercial investments
• Cost optimisations not related to restructurings
• Expected inflation
In the long term, projections follow the level of
inflation unless long-term contracts are in place.
Operating investments
Projections are based on past experience of the level
of necessary maintenance of existing production
capacity, including replacement of parts. This also
includes planned production line overhauls and
improvements to existing equipment. Non-contracted
capacity increases and new equipment are not
included.
Terminal period growth
Growth rates are projected to be equal to or below
the expected rate of general inflation and assume no
nominal growth. The projected growth rates and the
applied discount rates are compared to ensure a
sensible correlation between the two.
SECTION 2.2 (CONTINUED)
IMPAIRMENT
In recent years, the modern off-trade,
consisting of hypermarkets and supermarkets,
has grown significantly and now accounts for
approximately 50% of the market in Russia.
Another growing channel is the so-called DIOT
– draught in off-trade – which is estimated to
account for around 10-15% of the market.
In recent years, the competitive environment
has been challenging, particularly in Russia,
which has seen an increased focus on volume.
To offset the volume decline caused by our
previous focus on value in this market, we
made a decision to become more volume-
focused, which had a negative impact on
regional margins. We expect the focus on
volume and the related margin pressure to
continue in the coming year.
Management expects the current
macroeconomic situation and developments to
continue in the short term, with inflation
stabilising at the current level. In the medium
to long term, interest rates are expected to
decline and stabilise at a level lower than
currently observed in the market. This will ease
the pressure on profitability from input costs
denominated in foreign currencies.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Goodwill
The value in use is the discounted value of the
expected future risk-adjusted cash flows. This
involves developing multiple probability-weighted
scenarios to reflect different outcomes in terms of
timing and amount.
Key assumptions
The cash flow is based on the budget and target
plans for the next three years. Cash flows beyond the
three-year period are extrapolated using the terminal
period growth rate.
The probability weighting applied is based on past
experience and the uncertainty of the prepared
budget and target plans.
Potential upsides and downsides identified during the
budget process and in the daily business are reflected
in the future cash flow scenarios for each CGU.
The risk-adjusted cash flows are discounted using a
discount rate reflecting the risk-free interest rate for
each CGU with the addition of a spread. The interest
rates used in the impairment tests are based on
observable market data. Please refer to the
description of discount rates in section 2.2.3.
The key assumptions on which management bases its
cash flow projections are:
• Volumes
• Sales prices
• Input costs
• Operating investments
• Terminal period growth
The assumptions are determined at CGU level and are
based on past experience, external sources of
information and industry-relevant observations for
each CGU. Local conditions, such as expected
developments in macroeconomic and market
conditions specific to the individual CGUs, are
considered. The assumptions are challenged and
verified by management at CGU and Group level.
The budget and target plan process takes into
account events or circumstances that are relevant in
order to reliably project the short-term performance
of each CGU. Examples include significant campaign
activities, changes in excise duties etc., which may
have a short-term impact but are non-recurring.
Given their short-term nature, they are not taken into
consideration when estimating the terminal period
growth rate.
Volumes
Projections are based on past experience, external
market data, planned commercial initiatives, such as
marketing campaigns and sponsorships, and the
expected impact on consumer demand and the level
of premiumisation. The projections are, if relevant,
adjusted for the expected changes in the level of
premiumisation. No changes in market shares are
assumed in the medium or long term.
Demographic expectations general to the industry,
such as the development in population, consumption
levels, generation-shift patterns, rate of urbanisation
as well as macroeconomics etc., are also considered
for medium- and long-term projections.
Events and circumstances can impact the timing of
volumes entering the market. This can be affected by
excessive stocking related to an increase in excise
duties, campaign activities and the timing of national
holidays and festivals. Such short-term effects are
not material to volume projections and do not impact
the long-term projections.
Sales prices
The level of market premiumisation and the locally
available portfolio are key drivers in identifying price
points. When planning pricing structures, factors
including price elasticity, local competition and
inflation expectations can also impact the projection.
Increases in excise duties are typically passed on to
the customers immediately or with a delay of no
more than a few months. Since the increase is a
pass-through cost and thereby compensated for by
price increases at the time of implementation, it does
not impact the long-term sales price growth and is
therefore not taken into consideration in the
projections unless circumstances specifically indicate
otherwise. No changes to duties in the short or
medium term are taken into consideration unless
there is a firm plan to introduce changes.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
75
SECTION 2.2 (CONTINUED)
IMPAIRMENT
2.2.3 IMPAIRMENT TEST OF BRANDS
Brands with indefinite useful life
DKK million
Baltika brand
International brands
Significant brands
2019
6,402
3,000
9,402
2018
5,585
3,000
8,585
In 2019, significant brands represented 60%
(2018: 60%) of the total carrying amount of
brands with indefinite useful life.
Other brands comprise a total of 18 brands
(2018: 17 brands) that individually are not
material compared with the total carrying
amount.
BALTIKA BREWERIES
2019 was the second consecutive year with
low-single-digit growth in the Russian beer
market after a continuous decline in recent
years due to very challenging macroeconomic
conditions.
The Baltika brand performed in line with the
growth projections made when the expected
future growth for the brand was reassessed
when the brand was impaired in 2017.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Brands
The test for impairment of brands is performed using
the relief from royalty method and is based on the
expected future cash flows generated from the
royalty payments avoided for the individual brand for
the next 20 years and projections for subsequent
years.
The risk-free cash flows are discounted using a
discount rate reflecting the risk-free interest rate with
the addition of the risk premium associated with the
individual brand.
Key assumptions
The key assumptions on which management bases its
cash flow projection include the expected useful life,
revenue growth, a theoretical tax amortisation
benefit, the royalty rate and the discount rate.
Expected useful life
Management has assessed that the value of brands
with indefinite useful life can be maintained for an
indefinite period, as these are well-established brands
in their markets, some of which have existed for
centuries. The beer industry is characterised as being
very stable with consistent consumer demand and a
predictable competitive environment, and is expected
to be profitable for the foreseeable future. Control of
the brands is legally established and is enforceable
indefinitely.
In management’s opinion, the risk of the useful life of
these brands becoming finite is minimal because of
their individual market positions and because current
and planned marketing initiatives are expected to
sustain their useful life.
Revenue growth
At the time of acquisition of any individual brand, a
revenue growth curve is forecast based on a long-
term strategic view of the risk and opportunities
relevant to the brand. The curve is forecast for a 20-
year horizon. This horizon reliably reflects the lengthy
process of implementing brand strategies to support a
brand occupying its intended place in the Group’s
portfolio. The forecast period applied is comparable
with the common term of the majority of licence
agreements to which the Group is party.
In the local markets, the product portfolio usually
consists of local power brands and international
premium brands. When projecting revenue growth for
local brands, in addition to its commercial strength –
such as market share and segment position – the
forecast takes into consideration the demographics of
the primary markets, including expected development
in population, consumption levels, generation-shift
patterns, rate of urbanisation, beer market maturity,
level of premiumisation, circumstances generally
limiting the growth opportunities for alcoholic
beverages etc.
For brands with global or regional presence,
enhanced investments in product development and
marketing are expected. The expected growth rate for
these brands is generally higher than for more
localised brands, and is usually highest early in the
20-year period.
Depending on the nominal growth expectations for
the individual brand, the revenue growth in individual
years may be above, equal to or below the forecast
inflation level in the markets where the brand is
present.
When preparing budgets, consideration is given to
events or circumstances that are relevant in order to
reliably project the short-term performance of each
brand. Examples include significant campaign
activities, changes in excise duties etc., which may
have a short-term impact but are non-recurring and
quickly absorbed by the business. Since the impact is
not material to the long-term projections, it is not
taken into consideration when estimating the long-
term and terminal period growth rates. Please refer
to the description of the impact of increases in excise
duties in the description of sales prices in section
2.2.2.
Tax benefit
The theoretical tax benefit applied in the test makes
use of tax rates and amortisation periods based on
current legislation. The impairment test applies tax
rates in the range of 15-34% and amortisation
periods of 5-10 years.
Royalty rate
Royalties generated by a brand are based on the
Group’s total income from the brand and are earned
globally, i.e. the income is also earned outside the
CGU that owns the brand. If external licence
agreements for the brand already exist, the market
terms of such agreements are taken into
consideration when assessing the royalty rate that
the brand is expected to generate in a transaction
with independent parties. The royalty rate is based on
the actual market position of the individual brand in
the global, regional and local markets and assumes a
20-year horizon. This term is common to the
beverage industry when licensing brands.
For some brands, the share of the total beer market
profit exceeds the volume share to an extent that
creates significant market entry barriers for
competing brands and justifies a higher royalty rate.
Key assumptions
2019
Baltika brand
International brands
Royalty rates
Average
revenue
growth
3%
1%
Terminal
period growth
Pre-tax
discount rate
Post-tax
discount rate
International, premium and
speciality beers
4%
1%
10.8%
4.4%
9.5%
3.5%
Strong regional and national brands
Local and mainstream brands
3.5-15.0%
3.0-5.0%
2.0-3.5%
In recent years, the Bank of Russia has expressed its
expectations of a positive future real interest rate at
around 2.5-3.0% in the short term.
The current economic environment in Russia indicates
that a stable long-term real interest rate lower than
the current level will be reached within a few years. In
addition, the latest published expectations from key
international financial institutions show an expected
long-term real interest rate of 2.5%. Therefore, a real
interest rate of 2.5% is maintained as the long-term
growth expectation in the impairment test.
The impairment test of the Baltika brand is sensitive
to changes in the real interest rate. Since no expected
future long-term real interest rate can be directly
observed, the estimate of a real interest rate is
subjective and associated with risk.
Interest rates applied in Western Europe
Western Europe is experiencing very low interest
rates, which in several countries are even lower than
inflation, resulting in negative real interest rates. The
Group generally applies a growth rate in the terminal
period that is equal to or slightly lower than expected
inflation. Management does not expect assets and
CGUs subject to impairment testing to have a
negative real interest rate in perpetuity.
To avoid applying negative real interest rates in
perpetuity, the discount rate applied for the
calculation of net present value of the cash flows in
the terminal period has been adjusted to include an
interest rate that is at least equal to the expected rate
of inflation.
SECTION 2.2 (CONTINUED)
IMPAIRMENT
Discount rates
The discount rate is a weighted average cost of
capital (WACC) that reflects the risk-free interest rate
with the addition of a risk premium relevant to each
brand.
The risk-free interest rates used in the impairment
tests are based on observed market data. For
countries where long-term risk-free interest rates are
not observable or valid due to specific national or
macroeconomic conditions, the interest rate is
estimated based on observations from other markets
and/or long-term expectations expressed by
international financial institutions considered reliable
by the Group.
The added credit risk premium (spread) for the risk-
free interest rate is fixed at market price or slightly
higher, reflecting the expected long-term market
price. The aggregate interest rate, including spread,
thereby reflects the long-term interest rate applicable
to the Group’s investments in the individual markets.
Interest rates applied in Eastern Europe
In recent years, the macroeconomic situation has
deteriorated significantly in Eastern Europe, resulting
in interest rates and inflation increasing to a level
significantly higher than the Group’s long-term
expectations.
The use of expected future interest rates in lieu of
appropriate observable interest rates does not impact
the conclusion of the impairment test because the
relationship between discount rates and growth rates
(the real interest rate) is expected to be constant.
Expectations for the long-term real interest rate
remain a key assumption for the impairment testing
in general, and for CGUs with exposure to the Russian
market in particular.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
76
2.2.4 SENSITIVITY TESTS
Sensitivity tests have been performed to
determine the lowest forecast and terminal
period growth rates and/or highest discount
rates that can occur in the groups of CGUs and
brands with indefinite useful life without
leading to any impairment loss.
The risk-free interest rates observable for
Western Europe remained low at the end of
2019. The sensitivity tests calculate the impact
of higher interest rates and allow for a double-
digit percentage-point increase in risk-free
interest rates.
Due to a challenging macroeconomic situation
in some CGUs and groups of CGUs, the Group
performed additional sensitivity tests to ensure
that a potential impairment was not
overlooked. These additional sensitivity tests
did not identify any potential impairment.
GOODWILL
The test for impairment of goodwill did not
identify any CGUs or groups of CGUs to which
goodwill is allocated where a reasonably
possible negative change in a key assumption
would cause the carrying amount to exceed the
recoverable amount.
The goodwill allocated to Eastern Europe was
primarily recognised when the Group
completed the step acquisition of the remaining
50% of the Baltic Beverage Holding Group from
Scottish & Newcastle in 2008. However, the
impairment test includes 100% of the cash flow
generated by Eastern Europe, resulting in the
recoverable amount significantly exceeding the
carrying amount.
BRANDS
Following the impairment losses recognised in
2017 and 2016 for the Baltika and Chongqing
Brewery Group brands, a reasonably possible
negative change in a key assumption would
cause the carrying amount to exceed the
recoverable amount. The sensitivity to changes
in the assumptions is shown in the table below.
Key assumptions
The key assumptions relevant to the
assessment of the recoverable amount are:
• Volume
• Price
• Discount rate
The assumptions for volume and pricing are
closely linked, which, together with the
presence of multiple sub-brands in different
geographies within each brand, makes
individual sensitivity testing on the basis of
these two assumptions highly impractical.
Instead, sensitivity testing is performed for the
overall revenue growth rate, both in the
forecast period and the terminal period.
The sensitivity test for the maximum decline in
growth rate in the forecast period assumes a
year-on-year decline in the nominal growth
rate, thereby estimating the accumulated effect
of a negative change for the full forecast
period.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
77
SECTION 2.2 (CONTINUED)
IMPAIRMENT
The sensitivity tests were completed assuming
all other assumptions were unchanged, as it is
relevant to assess the sensitivity to, for
example, a decline in the growth rate
independently of changes in the discount rate.
This is because the growth rate in itself might
be impacted by changes in brand strategy and
other market factors.
The sensitivity calculated also assumes a
straight-line impact despite the fact that
changes in market dynamics and adjustments
to these will in practice have different impacts
in the individual years and might not apply in
the long term.
Western European interest rates have been low
for several years and are currently lower than
inflation. An increase in the interest rates
without a corresponding change in inflation will
result in a lower recoverable amount for brands
and could potentially lead to impairment. The
risk of a significant write-down is considered
by management to be very low.
Sensitivity test
DKKbn
∆
Baltika brand
Chongqing Brewery Group brands
Baltika brand
The Baltika brand was written down to its
recoverable amount at the end of 2017. As a
result, even a small negative change in the key
assumptions could lead to further impairment.
negative change in the interest rate, the
terminal growth rate and the average growth
rate in the forecast period (year on year) would
result in a reduction in the recoverable amount
of DKK 1.7bn.
At 31 December 2019, the carrying amount of
the Baltika brand amounted to DKK 6,402m
(2018: DKK 5,585m).
Changes in the market dynamics in Russia and
the increasingly challenging competitive
environment could have a significant negative
impact on the recoverable amount.
Macroeconomic recovery could lead to further
premiumisation or localisation, which could
drive consumers towards international brands
or local/regional brands.
An increase in the real interest rate from the
current 2.5%, either because of a higher interest
rate or lower inflation, could significantly
reduce the recoverable amount.
A 1 percentage point increase in the risk-free
interest rate would result in a reduction in the
recoverable amount of DKK 1.0bn, and a 1
percentage point decrease in the terminal
growth rate would result in a reduction in the
recoverable amount of DKK 0.4bn. The
combined effect of a 1 percentage point
Average
forecast
growth rate
Terminal
period
growth rate
Risk-free
interest rate
-1 %-point
-1 %-point
+1 %-point
-0.7
-0.1
-0.4
-0.1
-1.0
-0.1
Chongqing Brewery Group brands
The Chongqing Brewery Group brands were
written down to their recoverable amount in
2016, and the recoverable amount at the end
of 2019 remained close to the carrying amount
of DKK 902m (2018: DKK 895m). As a result,
a reasonably possible negative change in the
key assumptions could lead to further
impairment.
The brands are sensitive to developments in the
mainstream segment in China, where pressure
from premium and upper-mainstream
segments – in which the brands are not
represented – could lead to a further drop in
market share and thereby a further reduction
of the recoverable amount.
Similarly, a change in consumer trends towards
the discount segment could have a negative
impact on the recoverable amount.
A 1 percentage point increase in the risk-free
interest rate would result in a reduction in the
recoverable amount of DKK 0.1bn, and a
1 percentage point decrease in the terminal
growth rate would result in a reduction in the
recoverable amount of less than DKK 0.1bn.
SECTION 2.3
INTANGIBLE ASSETS
AND PROPERTY,
PLANT AND
EQUIPMENT
DKK million
2019
Cost
Cost at 1 January
Recognition of right-of-use assets
Restated cost at 1 January
Acquisition of entities
Additions, including right-of-use assets
Disposals
Transfers
Foreign exchange adjustments etc.
Cost at 31 December
Disposals
Amortisation and depreciation
Impairment losses
Transfers
Foreign exchange adjustments etc.
Amortisation, depreciation and impairment losses at 31 December
Carrying amount at 31 December
Right-of-use assets included at 31 December
Amortisation and depreciation
Carrying amount at 31 December
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
78
Intangible assets
Property, plant and equipment
Asset base
Goodwill
Brands
Other
intangible
assets
Total
Land and
buildings
Plant and
machinery
Other
equipment,
fixtures and
fittings
Total
Total
52,535
25,028
5,683
83,246
-
-
-
-
52,535
25,028
5,683
83,246
28,960
23
14,197
564
60,751
1,592
143,997
1,592
28,983
14,761
62,343
145,589
22
-
-
-
301
-
-
-
1,969
2,219
4
118
-925
3
84
54,526
27,548
4,967
-
-
-
-
12
1,618
52,908
-
21
6
-
1,261
11,593
15,955
4,467
-914
405
7
-3
63
4,025
942
327
118
-925
3
4,272
87,041
16,378
-914
426
13
-3
1,336
17,236
69,805
17,594
1,005
18,599
-
424
-873
515
592
115
2,139
-1,028
-680
1,066
4
2,448
-2,011
156
402
19,257
30,595
15,760
7,779
17,447
-434
624
35
10
244
8,258
10,999
-884
1,420
64
-16
796
18,827
11,768
10,131
-1,825
2,042
9
9
275
10,641
5,119
119
5,011
-3,912
-9
2,060
65,612
35,357
-3,143
4,086
108
3
1,315
37,726
27,886
446
5,129
-4,837
-6
6,332
152,653
51,735
-4,057
4,512
121
-
2,651
54,962
97,691
-
-
-
-
-
-
-
-
167
1,013
8
26
227
469
402
1,508
402
1,508
Amortisation, depreciation and impairment losses
Amortisation, depreciation and impairment losses at 1 January
1,606
10,305
SECTION 2.3 (CONTINUED)
INTANGIBLE ASSETS
AND PROPERTY,
PLANT AND
EQUIPMENT
DKK million
2018
Cost
Cost at 1 January
Acquisition of entities
Additions
Disposal of entities
Disposals
Transfers
Foreign exchange adjustments etc.
Cost at 31 December
Goodwill
Brands
52,113
2,047
-
-
-
-
27,243
-
-
-
-
-
-1,625
52,535
-2,215
25,028
Amortisation, depreciation and impairment losses
Amortisation, depreciation and impairment losses at 1 January
1,616
11,553
Disposal of entities
Disposals
Amortisation and depreciation
Impairment losses
Transfers
Foreign exchange adjustments etc.
Amortisation, depreciation and impairment losses at 31 December
Carrying amount at 31 December
-
-
-
-
-
-
-
21
-
-
-10
1,606
50,929
-1,269
10,305
14,723
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
79
Intangible assets
Property, plant and equipment
Asset base
Total
Land and
buildings
Plant and
machinery
Other
equipment,
fixtures and
fittings
Total
Total
13,632
58,487
143,558
85,071
2,047
127
-21
-108
8
-3,878
16,746
1,003
159
-21
-179
115
-229
28,109
438
2,490
-5
-850
-582
-640
41
1,251
-
-978
458
-207
5,683
83,246
17,594
28,960
14,197
4,109
-21
-100
516
-
-
-37
4,467
1,216
17,278
-21
-100
537
-
-
-1,316
16,378
66,868
7,472
-21
-129
469
15
-13
-14
7,779
9,815
17,181
9,509
-3
-631
1,374
-3
-21
-450
17,447
11,513
-
-930
1,684
55
-43
-144
10,131
4,066
1,482
3,900
-26
-2,007
-9
-1,076
60,751
34,162
-24
-1,690
3,527
67
-77
-608
35,357
25,394
3,529
4,027
-47
-2,115
-1
-4,954
143,997
51,440
-45
-1,790
4,064
67
-77
-1,924
51,735
92,262
Other
intangible
assets
5,715
-
127
-21
-108
8
-38
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
80
SECTION 2.3 (CONTINUED)
INTANGIBLE ASSETS
AND PROPERTY,
PLANT AND
EQUIPMENT
Property, plant and equipment under
construction amounted to DKK 1,514m (2018:
DKK 2,126m) and mainly related to the new
central office in Copenhagen. For 2018, it also
included the greenfield brewery in Germany,
which started production in November 2019.
Property, plant and equipment under
construction are recognised in plant and
machinery until completion.
Other equipment, fixtures and fittings include
transport, office and draught beer equipment,
coolers and returnable packaging materials.
Other intangible assets include software, land
use rights and beer delivery rights.
RIGHT-OF-USE ASSETS
The Group leases various properties and
warehouses, production equipment, cars and
trucks. Lease terms are negotiated on an
individual basis and contain a wide range of
different terms and conditions.
As of 1 January 2019, the Group implemented
IFRS 16 and recognised right-of-use assets at
a total value of DKK 1,592m. During the year,
additions amounted to DKK 537m and
depreciation to DKK 402m.
Lease expenses recognised in the income
statement related to short-term leases and
leases of low-value assets and amounted to
DKK 96m. Such contracts comprise the lease of
copy and printing machines, coffee machines,
small IT devices and similar equipment.
For disclosures of the lease liabilities, please
refer to sections 4.4.1 and 4.7.
CAPITAL COMMITMENTS
The Group has entered into various capital
commitments that will not take effect until
after the reporting date and have therefore not
been recognised in the consolidated financial
statements. Capital commitments amounted to
DKK 56m (2018: DKK 229m).
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Useful lives and residual value of intangible
assets with finite useful life and property,
plant and equipment
Useful life and residual value are initially assessed
both in acquisitions and in business combinations.
Management assesses brands and property, plant
and equipment for changes in useful life. If an
indication of a reduction in the value or useful life
exists, such as changes in production structure,
restructuring and brewery closures, the asset is tested
for impairment. If necessary, the asset is written
down or the amortisation/depreciation period is
reassessed and, if necessary, adjusted in line with the
asset’s changed useful life. When changing the
amortisation or depreciation period due to a change
in the useful life, the effect on amortisation/
depreciation is recognised prospectively as a change
in accounting estimates.
Lease and service contracts
At inception of a contract, management assesses
whether the contract is or contains a lease.
Management considers the substance of any service
being rendered to classify the arrangement as either a
lease or a service contract. Particular importance is
attached to whether fulfilment of the contract
depends on the use of specific assets. The assessment
involves judgement of whether the Group obtains
substantially all the economic benefits from the use
of the specified asset and whether it has the right to
direct how and for what purpose the asset is used. If
these criteria are satisfied at the commencement
date, a right-of-use asset and a lease liability are
recognised in the statement of financial position.
In determining the lease term, management considers
all the facts and circumstances that create an
economic incentive to exercise an extension option or
not to exercise a termination option. Extension or
termination options are only included in the lease
term if the lease is reasonably certain to be extended
or not terminated. The term is reassessed if a
significant change in circumstances occurs. The
assessment of purchase options follows the same
principles as those applied for extension options.
The lease payment for cars and trucks often includes
cost of service and insurance. When these costs are
not objectively accessible, the Group estimates the
cost when separating the service component from the
lease.
Amortisation, depreciation and impairment losses
DKK million
Cost of sales
Sales and distribution expenses
Administrative expenses
Special items
Total
Intangible assets Property, plant and equipment
2019
46
209
171
13
439
2018
216
197
124
-
537
2019
2,591
1,267
258
78
4,194
Gain/loss on disposal of assets
2018
2,633
748
DKK million
173
40
Gain on disposal of property, plant and equipment and intangible assets
Loss on disposal of property, plant and equipment and intangible assets
3,594
Total
2019
90
-34
56
2018
36
-23
13
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
81
equipment, are recognised in the carrying amount of
the asset if it is probable that the costs will result in
future economic benefits for the Group. The replaced
components are derecognised from the statement of
financial position and recognised as an expense in the
income statement. Costs incurred for ordinary repairs
and maintenance are recognised in the income
statement as incurred.
Useful life, amortisation, depreciation and
impairment losses
Useful life and residual value are determined at the
acquisition date and reassessed annually. If the
residual value exceeds the carrying amount,
depreciation is discontinued.
Amortisation and depreciation are recognised on a
straight-line basis over the expected useful life of the
assets, taking into account any residual value. The
expected useful life and residual value are determined
based on past experience and expectations of the
future use of assets.
Depreciation is calculated on the basis of the cost less
the residual value and impairment losses.
Amortisation and depreciation are recognised as cost
of sales, sales and distribution expenses, and
administrative expenses depending on the use of the
asset.
Impairment
Impairment losses of a non-recurring nature are
recognised under special items.
The expected useful life is as follows:
Brands with finite
useful life
Software
Delivery rights
Customer
agreements/
relationships
Normally 20 years
Normally 3-5 years. Group-wide
systems developed as an
integrated part of a major
business development
programme: 5-7 years
Depending on contract; if no
contract term has been agreed,
normally not exceeding 5 years
Depending on contract with the
customer; if no contract exists,
normally not exceeding 20 years
Buildings
Technical installations
Brewery equipment
Filling and bottling equipment
Technical installations in warehouses
On-trade and distribution equipment
Fixtures and fittings, other plant
and equipment
Returnable packaging materials
Hardware
Land
20-40 years
15 years
15 years
8-15 years
8 years
5 years
5-8 years
3-10 years
3-5 years
Not depreciated
Leases
At the commencement date, the Group recognises a
lease liability and a corresponding right-of-use asset
at the same amount, except for short-term leases of
12 months or less and leases of low-value assets.
A right-of-use asset is initially measured at cost,
which equals the initial lease liability and initial direct
costs less any lease incentives received. The Group
has applied the practical expedient option allowed
under IFRS by using a portfolio approach for the
recognition of lease contracts related to assets of the
same nature and with similar lease terms, i.e. cars
and trucks.
Subsequently, the right-of-use asset is measured at
cost less depreciation and impairment losses, and
adjusted for remeasurement of the lease liability. The
right-of-use asset is depreciated over the earlier of
the lease term or the useful life of the asset. The
impairment testing of right-of-use assets follows the
same principles as those applied for property, plant
and equipment, cf. section 2.2.
Right-of-use assets are recognised as property, plant
and equipment.
The Group has elected not to recognise right-of-use
assets and liabilities for leases with a term of 12
months or less and leases of low-value assets. Lease
payments related to such leases are recognised in the
income statement as an expense on a straight-line
basis over the lease term.
Government grants and other funding
Grants and funding received for the acquisition of
assets and development projects are recognised in the
statement of financial position by deducting the grant
from the carrying amount of the asset. The grant is
recognised in the income statement over the life of
the asset as a reduced depreciation charge.
INTANGIBLE ASSETS
AND PROPERTY,
PLANT AND
EQUIPMENT
ACCOUNTING
POLICIES
Cost
Intangible assets and property, plant and equipment
are initially recognised at cost and subsequently
measured at cost less accumulated amortisation or
depreciation and impairment losses.
Cost comprises the purchase price and costs directly
attributable to the acquisition until the date when the
asset is available for use. The cost of self-constructed
assets comprises direct and indirect costs of
materials, components, sub-suppliers, wages and
salaries, and capitalised borrowing costs on specific or
general borrowings attributable to the construction of
the asset, and is included in plant and machinery.
Research and development costs are recognised in
the income statement as incurred. Development costs
of intangible assets, for example software, are
recognised as other intangible assets if the costs are
expected to generate future economic benefits.
For assets acquired in business combinations,
including brands and property, plant and equipment,
cost at initial recognition is determined by estimating
the fair value of the individual assets in the purchase
price allocation.
Goodwill is only acquired in business combinations
and is measured in the purchase price allocation.
Goodwill is not amortised but is subject to an annual
impairment test, cf. section 2.2.
Where individual components of an item of property,
plant and equipment have different useful lives, they
are accounted for as separate items.
Subsequent costs, for example in connection with
replacement of components of property, plant and
SECTION 3
SPECIAL ITEMS
AND PROVISIONS
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
82
1,064m
SPECIAL ITEMS, INCOME
(DKK)
Impacted by gains on disposal of two
brewery sites in Western Europe.
-563m
SPECIAL ITEMS, EXPENSES
(DKK)
Impacted by restructurings in Western and
Eastern Europe and an increase in
provisions related to the disposal of a
brewery site made in previous years.
SECTION 3.1
SPECIAL ITEMS
SPECIAL ITEMS, INCOME
In 2019, the Group recognised gains on the
disposal of a brewery site in Trondheim,
Norway, and the former brewery site in
Hamburg, Germany.
In November 2019, Carlsberg Deutschland
moved its operations to a new brewery outside
Hamburg. Construction of the new brewery
commenced in 2016, and the old brewery was
sold the same year. However, the sale was
contingent on the move to the new brewery.
The sales price was received in 2016 and
recognised as a prepayment within borrowings.
At the completion date in November 2019, the
gain on disposal was recognised as special item
income and the proceeds were recognised as
cash flow from disposal of property, plant and
equipment, reversing the borrowings thereby
decreasing the external financing cash flow.
In 2018, special items were impacted by the
disposal of land and buildings in Russia and the
UK, which had been impaired in previous years,
reversed provisions made for projects in prior
years and the disposal of two minor entities in
China.
SPECIAL ITEMS, EXPENSES
In 2019, the Group carried out various
restructuring projects across Western and
Eastern Europe. The restructuring projects were
the result of the continued focus on cost and
efficiency initiatives, and included changes in
sales and distribution operations and related
organisational changes, including termination
of employees. These projects typically run over
several years.
Furthermore, special items included an increase
in provisions retained by the Group on disposal
of a former brewery site in previous years.
In addition to restructuring projects, special
items in 2018 were impacted by impairment
losses on returnable steel kegs and filling lines
due to the roll-out of the DraughtMaster
system in Western Europe.
Special items
DKK million
Special items, income
Gain on disposal of entities and assets
Disposal of property, plant and equipment previously impaired, including
adjustments to gains and reversal of provisions made in prior years
Reversal of impairment losses, cf. section 2.2
Revaluation gain on step acquisition of entities, cf. section 5.2
Total
Special items, expenses
Restructurings and impairment of property, plant and equipment in Western Europe, net
Restructurings and impairment of property, plant and equipment in Asia, net
Restructurings and impairment of property, plant and equipment in Eastern Europe, net
Provisions related to disposal of a former brewery site in previous years
Impairment of brands, cf. section 2.2
Other
Total
Special items, net
2019
2018
1,061
-
3
-
42
199
49
13
1,064
303
-337
-8
-96
-110
-6
-6
-563
501
-323
-54
-
-
-
-14
-391
-88
SECTION 3.1 (CONTINUED)
SPECIAL ITEMS
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The use of special items entails management
judgement in the separation from ordinary items.
Management carefully considers individual items and
projects (including restructurings) in order to ensure
the correct distinction and split between operating
activities and significant income and expenses of a
special nature.
Management initially assesses the entire restructuring
project and recognises all present costs of the project.
The projects are assessed on an ongoing basis, with
additional costs possibly being incurred during the
lifetime of the project.
The estimate includes expenses related to termination
of employees, onerous contracts, break fees and
other obligations arising in connection with
restructurings. Management reassesses the useful life
and residual value of non-current assets used in an
entity undergoing restructuring.
Impact of special items on operating profit
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
83
ACCOUNTING
POLICIES
Special items include significant income and expenses
of a special nature in terms of the Group’s revenue-
generating activities that cannot be attributed directly
to the Group’s ordinary operating activities.
Special items also include significant non-recurring
items, including termination benefits related to
retirement of members of the Executive Committee,
impairment of goodwill and brands, gains and losses
on the disposal of activities and associates,
revaluation of the shareholding in an entity held
immediately before a step acquisition of that entity,
and transaction costs in a business combination.
Significant restructuring of processes and structural
adjustments are included in special items.
Special items are shown separately from the Group’s
ordinary operations to facilitate a better
understanding of the Group’s financial performance.
SECTION 3.2
PROVISIONS
Restructuring provisions relate to termination
benefits to employees made redundant,
primarily as a result of a restructuring project
accounted for as special items.
In 2019, restructuring provisions of DKK 311m
related primarily to Kronenbourg, Ringnes,
Carlsberg Sverige and certain local supply
companies.
Other provisions of DKK 4,989m related to
ongoing disputes and lawsuits, profit sharing in
France and employee obligations other than
retirement benefits.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
In connection with restructurings, management
assesses the timing of the costs to be incurred, which
influences the classification as current or non-current
liabilities. Provision for onerous contracts is based on
agreed terms with the other party and expected
fulfilment of the contract based on the current
estimate of volumes, use of raw materials etc.
Management assesses provisions, contingent assets
and liabilities and the likely outcome of pending or
probable lawsuits etc. on an ongoing basis. The
outcome depends on future events, which are by
nature uncertain. In assessing the likely outcome of
lawsuits and tax disputes etc., management bases its
assessment on external legal advice and established
precedents.
DKK million
2019
2018
Transfers
If special items had been recognised in operating profit before special items,
they would have been included in the following line items:
Cost of sales
Sales and distribution expenses
Administrative expenses
Other operating income
Other operating expenses
Special items, net
Discounting
Foreign exchange adjustments etc.
Provisions at 31 December 2019
-112
-151
14
179
-18
-88
Recognised in the statement of
financial position
Non-current provisions
Current provisions
Total
-296
-77
55
1,061
-242
501
Provisions
DKK million
Provisions at 1 January 2019
Acquisition of entities
Additional provisions recognised
Used during the year
Reversal of unused provisions
Restructurings
Onerous
contracts
381
-
102
-170
-13
4
4
3
408
2
5
-41
-
18
3
5
Other
4,138
154
702
-206
-122
291
30
2
Total
4,927
156
809
-417
-135
313
37
10
311
400
4,989
5,700
88
223
311
356
44
400
3,593
1,396
4,989
4,037
1,663
5,700
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
84
GUARANTEES AND COMMITMENTS
The Group has issued guarantees for loans etc.
raised by third parties (non-consolidated
entities) of DKK 395m (2018: DKK 511m). In
2019 and 2018, no guarantees were issued for
loans raised by associates and joint ventures.
Certain guarantees etc. are issued in connection
with disposal of entities and activities. Apart
from items recognised in the statement of
financial position or disclosed in the
consolidated financial statements, these
guarantees etc. will not have a material effect
on the Group’s financial position.
Capital commitments, lease liabilities and
service agreements are described in section 2.3.
Furthermore, a dawn raid was conducted in the
Group’s subsidiary in India in 2018 with
investigations still ongoing.
At 31 December 2019, no final rulings had
been made concerning the ongoing cases in
any of the entities that have experienced dawn
raids in recent years. However, there is still a
significant risk related to these cases due to the
inherent uncertainty.
Management and the general counsel
continuously assess these risks and their likely
outcome. It is the opinion of management and
the general counsel that, apart from items
recognised in the statement of financial
position, the outcome of these lawsuits,
disputes etc. cannot be reliably estimated in
terms of amount or timing. The Group does not
expect the ongoing lawsuits and disputes to
have a material impact on the Group’s financial
position, net profit or cash flow, except for
items recognised in the statement of financial
position.
SECTION 3.2 (CONTINUED)
PROVISIONS
ACCOUNTING
POLICIES
SECTION 3.3
CONTINGENT
LIABILITIES
Provisions, including profit-sharing provisions, are
recognised when, as a result of events arising before
or at the reporting date, the Group has a legal or a
constructive obligation and it is probable that there
may be an outflow of economic benefits to settle the
obligation.
The Group operates in very competitive
markets where consolidation is taking place
within the industry and among our customers
and suppliers, all of which in different ways
influences our business.
Provisions are discounted if the effect is material to
the measurement of the liability. The Group’s average
borrowing rate is used as the discount rate.
Restructuring costs are recognised when a detailed,
formal restructuring plan has been announced to
those affected no later than at the reporting date. On
acquisition of entities, restructuring provisions in the
acquiree are only included in the opening balance
when the acquiree has a restructuring liability at the
acquisition date.
A provision for onerous contracts is recognised when
the benefits expected to be derived by the Group from
a contract are lower than the unavoidable costs of
meeting its obligations under the contract.
In the ordinary course of business, the Group is
party to certain lawsuits, disputes etc. of
various scopes, some of which are referred to
below. The resolution of these lawsuits,
disputes etc. is associated with uncertainty, as
they depend on legal proceedings, such as
negotiations between the parties affected,
governmental actions and court rulings.
In 2014, the Federal Cartel Office in Germany
issued a decision and imposed a fine of EUR
62m for alleged infringement of the
competition rules in 2007. Carlsberg
Deutschland appealed the decision to the
relevant German court and in 2019 received a
ruling in its favour. The ruling was subsequently
appealed by the prosecutor to the German
Supreme Court.
In 2018, the Group’s associate in Portugal
received a statement of objections from the
local authority, which was the next step
following a previously conducted dawn raid. In
2019, a fine of EUR 24m was imposed. The
Group’s associate received two additional
statements of objections from the local
authority in 2019 concerning two other cases.
SECTION 4
FINANCING COSTS, CAPITAL
STRUCTURE AND EQUITY
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
85
18.8bn
NET INTEREST-BEARING DEBT
(DKK)
At 31 December 2019, gross financial debt
amounted to DKK 25.0bn (2018: DKK 24.0bn).
Net interest-bearing debt was DKK 18.8bn, an
increase of DKK 1.5bn versus year-end 2018.
The financial position is impacted by the strong
free cash flow, which funded a large part of the
share buy-back initiated in February 2019.
Changes in net interest-bearing debt (DKKm)
Furthermore, it was impacted by the
recognition of lease liabilities of DKK 1.6bn and
by the release of the prepaid proceeds
(borrowings) on the disposal of the former
brewery site in Hamburg, Germany of DKK
1.0bn.
The leverage ratio, measured as net interest-
bearing debt to operating profit before
depreciation, amortisation and impairment
losses, was 1.25x at year-end (2018: 1.29x).
1,592
-12,239
17,313
4,100
411
64
18,776
2,738
850
1,711
2,236
4.1bn
SHARE BUY-BACK (DKK)
At 31 December 2019, the Company had
repurchased shares worth DKK 4.1bn under the
12-month share buy-back programme
initiated on 6 February 2019.
46.0bn
EQUITY (DKK)
Equity amounted to DKK 46.0bn at 31
December 2019 (2018: DKK 47.9bn), DKK
43.4bn of which was attributable to
shareholders in Carlsberg A/S and DKK 2.6bn
to non-controlling interests. The change in
equity of DKK 1.9bn was mainly the result of
the consolidated profit of DKK 7.5bn being
offset by the dividend payout of DKK 3.6bn,
the share buy-back of DKK 4.1bn and non-
controlling interests of DKK 4.5bn, including
the acquisition of the remaining 25% in
Cambrew.
-738m
NET FINANCIAL ITEMS (DKK)
Financial items, net, amounted to DKK -738m
against DKK -722m in 2018. Excluding
currency gains and fair value adjustments,
financial items, net, amounted to DKK -650m
(2018: DKK -758m), positively impacted by
lower average funding costs.
Leverage ratio (NIBD/EBITDA)
2.6
2.2
1.8
1.4
1.0
2015
2016
2017
2018
2019
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
86
SECTION 4.1
FINANCIAL INCOME
AND EXPENSES
Interest income primarily relates to interest on
cash and cash equivalents measured at
amortised cost.
Foreign exchange losses, net, include fair value
adjustments of hedges and foreign exchange
losses. The fair value adjustment of hedges not
designated as hedging instruments amounted
to DKK 88m (2018: DKK -54m), cf. section
4.8. Foreign exchange losses amounted to DKK
-176m (2018: DKK 90m).
Of the net change in fair value of cash flow
hedges transferred to the income statement,
DKK -102m (2018: DKK -87m) is included in
revenue and cost of sales and DKK 7m (2018:
DKK 10m) is included in financial items.
Financial items, net (DKKbn)
-1.6
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
Financial items recognised in the income statement
DKK million
Financial income
Interest income
Foreign exchange gains, net
Interest on plan assets, defined benefit plans
Other
Total
Financial expenses
Interest expenses
Capitalised financial expenses
Foreign exchange losses, net
Interest cost on obligations, defined benefit plans
Interest expenses, lease liabilities
Other
Total
Financial items, net, recognised in the income statement
Financial items excluding foreign exchange, net
Financial items, net
Financial items, net, excl. fair value and
forex adjustments
2019
2018
Financial items recognised in other comprehensive income
DKK million
2019
2018
153
36
155
14
358
-579
10
-
135
-
189
36
360
-519
18
-88
-256
-12
-241
Foreign exchange adjustments of foreign entities
Foreign currency translation of foreign entities
Recycling of cumulative translation differences of entities
acquired in step acquisitions or disposed of
Total
-232
Fair value adjustments of hedging instruments
-
Change in fair value of effective portion of cash flow hedges
-279
Change in fair value of cash flow hedges transferred to the income statement
-1,098
-1,080
Change in fair value of net investment hedges
-738
-650
-722
-758
Total
Financial items, net, recognised in other comprehensive income
3,479
-2,685
6
3,485
-69
-2,754
-93
95
-325
-323
3,162
-94
-77
-469
-640
-3,394
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
87
SECTION 4.2
NET INTEREST-
BEARING DEBT
SECTION 4.3
CAPITAL
STRUCTURE
Of the gross financial debt at year-end, 84%
(2018: 70%) was long term, i.e. with maturity
of more than one year.
Long-term and short-term borrowings
amounted to DKK 25.0bn at 31 December
2019 (2018: DKK 24.0bn). Long-term
borrowings totalled DKK 20.9bn (2018: DKK
16.8bn) and short-term borrowings totalled
DKK 4.1bn (2018: DKK 7.2bn). The shift
between long-term and short-term
borrowings was mainly due to a EUR 400m
bond maturing in July 2029, which replaced a
EUR 750m bond that matured on 3 July
2019.
4.3.1 CAPITAL STRUCTURE
Management regularly assesses whether the
Group’s capital structure is in the interests of
the Group and its shareholders.
The overall objective is to ensure a continued
development and strengthening of the Group’s
capital structure that supports long-term
profitable growth and a solid increase in key
earnings and ratios. This includes assessment
of and decisions on the split of financing
between share capital and borrowings, which is
a long-term strategic decision to be made in
connection with significant investments and
other transactions.
Carlsberg A/S’ share capital is divided into two
classes (A shares and B shares). Combined
with the Carlsberg Foundation’s position as
majority shareholder (in terms of control),
management considers that this structure will
remain advantageous for all of the
shareholders, enabling and supporting the
long-term development of the Group.
The Group targets a leverage ratio below 2.0x.
At the end of 2019, the leverage ratio was
1.25x (2018: 1.29x). The Group currently uses
share buy-back programmes to return excess
cash to shareholders.
The size of the share buy-back programmes
depends on the expected organic and inorganic
investments needed to grow the business and
the Group’s intention to maintain a leverage
ratio below 2.0x.
The Group generally intends to cancel treasury
shares which are not used for hedging of
incentive programmes.
The Group is rated by Moody’s Investors
Service and Fitch Ratings. Management
assesses the risk of changes in the Group’s
investment-grade rating as an element in
strategic decisions on capital structure.
Identification and monitoring of risks that could
change the rating were carried out on an
ongoing basis throughout the year.
The difference of DKK 6.2bn between gross
financial debt and net interest-bearing debt
mainly comprised cash and cash equivalents
and on-trade loans.
Net interest-bearing debt
DKK million
Non-current borrowings
Current borrowings
Gross financial debt
Cash and cash equivalents
Net financial debt
Loans to associates,
interest-bearing portion
On-trade loans, net
Other receivables, net
2019
20,879
4,112
24,991
-5,222
19,769
-226
-668
-99
Net interest-bearing debt
18,776
17,313
Share capital
2018
16,750
7,233
23,983
Class A shares
Class B shares
Total share capital
Shares of
DKK 20
Nominal
value,
DKK ’000
Shares of
DKK 20
Nominal
value,
DKK ’000
Shares of
DKK 20
Nominal
value,
DKK ’000
-5,589
1 January 2018
33,699,252
673,985
118,857,554
2,377,151
152,556,806
3,051,136
18,394
No change in 2018
-
-
-
-
-
-
-325
-717
-39
31 December 2018
33,699,252
673,985
118,857,554
2,377,151
152,556,806
3,051,136
No change in 2019
-
-
-
-
-
-
31 December 2019
33,699,252
673,985
118,857,554
2,377,151
152,556,806
3,051,136
A shares carry 20 votes per DKK 20 share. B shares carry two votes per DKK 20 share. A preferential right to an 8%
non-cumulative dividend is attached to B shares. Apart from votes and dividends, all shares rank equally.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
88
SECTION 4.3 (CONTINUED)
CAPITAL STRUCTURE
At 31 December 2019, dividends to non-
controlling interests of DKK 41m (2018: DKK
38m) were payable.
Transactions with shareholders
in Carlsberg A/S
4.3.2 EQUITY
DIVIDENDS
The Group proposes a dividend of DKK 21.00
per share (2018: DKK 18.00 per share),
amounting to DKK 3,204m (2018: DKK
2,746m). The proposed dividend has been
included in retained earnings at 31 December
2019.
Dividends to be paid out in 2020 for 2019, net
of dividends on treasury shares held at 31
December 2019, will amount to DKK 3,108m.
Dividends paid out in 2019 for 2018, net of
dividends on treasury shares, amounted to
DKK 2,738m (paid out in 2018 for 2017: DKK
2,439m). Dividends paid out to shareholders in
Carlsberg A/S do not impact taxable income in
Carlsberg A/S.
SHARE BUY-BACK AND TREASURY SHARES
On 6 February 2019, the Company initiated a
12-month DKK 4.5bn share buy-back
programme. At 31 December 2019, 4,518,999
B shares had been repurchased at a total
purchase price of DKK 4.1bn as part of this
programme.
According to the authorisation of the Annual
General Meeting, the Supervisory Board may,
in the period until 13 March 2023, allow the
Company to acquire treasury shares up to a
total holding of 10% of the nominal share
capital at a price quoted on Nasdaq
Copenhagen at the time of acquisition with a
deviation of up to 10%. The permitted holding
of treasury shares covers those acquired in
share buy-back programmes. The Company
holds no class A shares.
DKK million
Dividends paid to
shareholders
Acquisition of treasury
shares
Disposal of treasury
shares
Total
2019
2018
-2,738
-2,439
-4,100
-128
-
-6,838
78
-2,489
Transactions with non-controlling interests
DKK million
Dividends paid to NCI
Consideration paid for
acquisition of NCI
Total
2019
-850
-1,670
-2,520
2018
-831
-355
-1,186
The acquisition of non-controlling interests
relates to shares in Cambrew and in Carlsberg
Ukraine, cf. section 5.2.
ACCOUNTING
POLICIES
Proposed dividends
The proposed dividend is recognised as a liability at
the date when it is adopted at the Annual General
Meeting (declaration date). The dividend
recommended by the Supervisory Board, and
therefore expected to be paid for the year, is
disclosed in the statement of changes in equity.
Treasury shares
Cost of acquisition, consideration received and
treasury share dividends received are recognised
directly in equity as retained earnings. Capital
reductions from the cancellation of treasury shares
are deducted from the share capital at an amount
corresponding to the nominal value of
the shares and added to retained earnings.
Proceeds from the sale of treasury shares in
connection with the settlement of share-based
payments are recognised directly in equity.
Equity (DKKm)
47,889
3,485
-571
-3,591
7,477
-4,100
-4,521
-33
46,035
Treasury shares
1 January 2018
Acquisition of treasury shares
Used to settle share-based payments
31 December 2018
Acquisition of treasury shares
Used to settle share-based payments
31 December 2019
Fair value,
DKKm
124
Shares of
DKK 20
166,342
173,464
-240,353
69
99,453
4,518,999
-58,057
4,532
4,560,395
Nominal
value, DKKm
Percentage of
share capital
3.3
3.5
-4.8
2.0
90.4
-1.2
91.2
0.1%
0.1%
-0.2%
0.1%
3.0%
-0.1%
3.0%
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
89
SECTION 4.3 (CONTINUED)
CAPITAL STRUCTURE
4.3.3 OTHER COMPREHENSIVE INCOME
Other comprehensive income has mainly been
impacted by a positive foreign exchange
adjustment from the appreciation of RUB.
4.3.4 FINANCIAL RISK MANAGEMENT
The Group’s activities give rise to exposure to a
variety of financial risks, including market risk
(foreign exchange risk, interest rate risk and
commodity risk), credit risk and liquidity risk.
These risks are described in the following
sections:
The Group’s financial risks are managed by
Group Treasury in accordance with the
Financial Risk Management Policy approved by
the Supervisory Board as an integrated part of
the overall risk management process. The risk
management governance structure is described
in the Management review.
Debt instruments and deposits in foreign
currency reduce the overall risk, but do not
achieve the objective of reducing volatility in
specific items in the income statement.
• Foreign exchange risk: sections 1.3 and 4.6
• Interest rate risk: section 4.5
• Commodity risk: section 1.2.1
• Credit risk: sections 1.5.1 and 4.4.2
• Liquidity risk: section 4.7
To reduce exposure to these risks, the Group
enters into a variety of financial instruments
and generally seeks to apply hedge accounting
to reduce volatility in the income statement.
Other comprehensive income as recognised in the statement of changes in equity
DKK million
2019
Foreign exchange adjustments of foreign entities
Value adjustments of hedging instruments
Retirement benefit obligations
Other
Income tax
Total
2018
Foreign exchange adjustments of foreign entities
Value adjustments of hedging instruments
Retirement benefit obligations
Other
Income tax
Total
Currency
translation
Hedging
reserves
Retained
earnings
3,490
-325
-
-
20
3,185
-2,803
-469
-
-
58
-
-
-
-
-
-
-
-167
-
-
27
-3,214
-140
-
-
-570
16
36
Total
3,490
-325
-570
16
56
-518
2,667
-
-
406
4
-33
377
-2,803
-636
406
4
52
-2,977
Non-
controlling
interests
Other
comprehensive
income
-5
2
-1
2
-1
-3
49
-4
-14
-
-
31
3,485
-323
-571
18
55
2,664
-2,754
-640
392
4
52
-2,946
SECTION 4.4
BORROWINGS
AND CASH
4.4.1 BORROWINGS
As of 1 January 2019, the Group recognised
lease liabilities of DKK 1.7bn. During the year,
the split between current and non-current debt
changed, as a EUR 400m bond maturing in
July 2029 was issued to replace a EUR 750m
bond that was repaid at maturity in July 2019.
Furthermore, the Group started utilising the
European Commercial Paper (ECP) programme
in 2019, DKK 3.3bn, which is recognised in
other current borrowings.
Gross financial debt
Non-current
Issued bonds
Bank borrowings
Lease liabilities
Other borrowings
Total
Current
Issued bonds
Bank borrowings
Lease liabilities
Other borrowings
Total
Total borrowings
Fair value
19,673
27
1,165
14
16,697
35
-
18
20,879
16,750
-
5,602
347
424
3,341
4,112
24,991
26,414
526
-
1,105
7,233
23,983
25,248
An overview of issued bonds is provided in section 4.5.
Changes in gross financial debt
2019
2018
23,983
24,189
1,592
-
25,575
24,189
2,946
-5,598
-
-
-236
-38
3,264
-
-1,026
-414
129
-935
-82
-
-
-85
-123
-187
411
-
22
104
24,991
23,983
DKK million
Gross financial debt
at 1 January
Recognition of lease
liabilities
Restated gross financial debt
at 1 January
Proceeds from issue of
bonds
Repayment of bonds
Instalments on and proceeds
from borrowings, long-term
Instalments on and proceeds
from European Commercial
Papers
Release of prepayment
received for disposal of the
former brewery site in
Hamburg, Germany
Instalments on lease
liabilities
External financing
Change in bank overdrafts
Increase in lease liabilities,
net
Other, including foreign
exchange adjustments and
amortisation
Gross financial debt
at 31 December
ACCOUNTING
POLICIES
Borrowings
Borrowings are initially recognised at fair value less
transaction costs and subsequently measured at
amortised cost using the effective interest method.
Accordingly, the difference between the fair value less
transaction costs and the nominal value is recognised
under financial expenses over the term of the loan.
DKK million
2019
2018
Other
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
90
Lease liability
The lease liability is measured at the present value of
the remaining lease payments at the reporting date,
discounted using the incremental borrowing rate for
similar assets, taking into account the terms of the
leases. A remeasurement of the lease liability, for
example a change in the assessment of an option to
purchase, results in a corresponding adjustment of
the related right-of-use assets, cf. section 2.3.
Extension or termination options are included in the
lease term if the lease is reasonably certain to be
extended or not terminated. Consequently, all cash
outflows that are reasonably certain to impact the
future cash balances are recognised as lease liabilities
at initial recognition of lease contracts. The Group
reassesses the circumstances leading to it not
recognising extension or termination options on an
ongoing basis.
4.4.2 CASH
Cash and cash equivalents include short-term
marketable securities with a term of three
months or less at the acquisition date that are
subject to an insignificant risk of changes in
value. Short-term bank deposits amounted to
DKK 188m at 31 December 2019 (2018: DKK
252m). The average interest rate on these
deposits was 4.3% (2018: 6%).
Cash and cash equivalents
DKK million
Cash and cash equivalents
Bank overdrafts
Cash and cash equivalents,
net
2019
5,222
-73
2018
5,589
-155
5,149
5,434
ASSESSMENT OF CREDIT RISK
The Group is exposed to credit risk on cash and
cash equivalents (including fixed deposits),
investments and derivative financial
instruments with a positive fair value due to
uncertainty as to whether the counterparty will
be able to meet its contractual obligations as
they fall due.
The Group has established a credit policy under
which financial transactions may be entered
into only with financial institutions with a solid
credit rating. The credit exposure on financial
institutions is managed by Group Treasury.
The Group primarily enters into financial
instruments and transactions with the Group’s
relationship banks, i.e. banks extending loans
to the Group. Group Treasury monitors the
Group’s gross credit exposure to banks and
operates with individual limits on banks, based
on rating and access to netting of assets and
liabilities.
EXPOSURE TO CREDIT RISK
The carrying amount of DKK 5,222m (2018:
DKK 5,589m) represents the maximum credit
exposure related to cash and cash equivalents.
The credit risk on receivables is described in
section 1.5.1.
SECTION 4.5
INTEREST RATE RISK
The Group’s exposure to interest rate risk is
considered limited. At the reporting date, 100%
of the net financial debt consisted of fixed-rate
borrowings with interest rates fixed for more
than one year (2018: 91%). As 87% of the
Group’s net debt is in EUR, the interest rate
exposure primarily relates to the development
in the interest rates for EUR.
Net financial debt by currency
DKK million
2019
EUR
DKK
PLN
USD
CHF
RUB
Other
Total
2018
EUR
DKK
PLN
USD
CHF
RUB
Other
Total
Net financial
debt
17,170
-56
-472
1,846
1,561
436
-716
19,769
16,436
1,279
-372
986
977
-58
-854
18,394
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
91
The interest rate risk is measured by the
duration of the net financial debt. The target is
to have a duration between two and seven
years. At 31 December 2019, the duration was
4.4 years (2018: 4.2 years). Interest rate risks
are mainly managed using fixed-rate bonds.
SENSITIVITY ANALYSIS
It is estimated that a 1 percentage point
interest rate increase would lead to an increase
in interest expenses of DKK 0m (2018: increase
of DKK 16m). The analysis assumes a parallel
shift in the relevant yield curves.
If the market interest rate had been 1
percentage point higher at the reporting date, it
would have led to a financial gain of DKK
865m (2018: DKK 766m), and a similar loss
had the interest rate been 1 percentage point
lower. However, since all fixed-rate borrowings
are measured at amortised cost, there is no
impact on other comprehensive income or the
income statement.
The sensitivity analysis is based on the financial
instruments recognised at the reporting date.
The sensitivity analysis assumes a parallel shift
in interest rates and that all other variables
remain constant, in particular foreign exchange
rates and interest rate differentials between the
different currencies. The analysis was
performed on the same basis as for 2018. The
Group did not enter into any new interest rate
swaps in 2019 or 2018.
Interest rate
Interest rate risk
Fixed¹
Floating² %
Fixed² %
Floating¹
-2,580
-56
-472
1,846
1,561
436
-716
19,750
-
-
-
-
-
-
19
19,750
-339
1,279
-372
986
977
-58
-854
1,619
16,775
-
-
-
-
-
-
16,775
13%
100%
100%
100%
100%
100%
100%
0%
24%
100%
100%
100%
100%
100%
100%
9%
87%
DKK million
-
-
-
-
-
-
2019
Issued bonds
EUR 750m maturing 15 November 2022
100%
EUR 500m maturing 6 September 2023
EUR 1,000m maturing 28 May 2024
EUR 400m maturing 1 July 2029
76%
Total issued bonds
-
-
-
-
-
-
Total issued bonds 2018
Bank borrowings and other borrowings
Floating-rate
Fixed-rate
Total bank borrowings and other borrowings
91%
Total bank borrowings and other borrowings 2018
Interest
rate
Fixed
Fixed
Fixed
Fixed
Average
effective
interest
rate
2.7%
0.7%
2.6%
1.0%
2.0%
2.3%
Fixed for
Carrying
amount
Interest
rate risk
2-3 years
5,587
Fair value
3-4 years
3,712
Fair value
4-5 years
7,424
Fair value
> 5 years
2,950
Fair value
19,673
22,299
Floating
Fixed
0.2%
0.9%
< 1 year
> 1 year
5,242
Cash flow
76
Fair value
5,318
1,684
¹ Net financial debt consists of current and non-current items after currency derivatives less cash and cash equivalents.
² Net financial debt consists of current and non-current items less cash and cash equivalents.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
92
SECTION 4.6
FOREIGN EXCHANGE
RISK RELATED TO
NET INVESTMENTS
AND FINANCING
ACTIVITIES
4.6.1 CURRENCY PROFILE OF
BORROWINGS
The Group is exposed to foreign exchange risk
on borrowings denominated in a currency other
than the functional currency of the local
entities reporting the debt, as well as the risk
that arises when net cash inflow is generated in
one currency and loans are denominated and
have to be repaid in another currency.
4.6.2 HEDGING OF NET INVESTMENTS
IN FOREIGN SUBSIDIARIES
The Group holds a number of investments in
foreign subsidiaries where the translation of net
assets to DKK is exposed to foreign exchange
risks. The Group hedges part of this foreign
exchange exposure by entering into forward
exchange contracts (net investment hedges).
This mainly applies to net investments in CHF,
CNY, MYR, NOK and PLN. The basis for
hedging is reviewed at least once a year, and
the two parameters, risk reduction and cost,
are balanced. In economic terms, having debt
in foreign currency or creating synthetic debt
via forward exchange contracts constitutes
hedging of the DKK value of future cash flows
arising from operating activities or specific
transactions.
The most significant net risk relates to foreign
exchange adjustment of net investments in
RUB. This is because of the size of the net
investments in RUB combined with the
currency’s high volatility.
Where the fair value adjustments of forward
exchange contracts do not exceed the fair
value adjustments of the investment, the
adjustments of the financial instruments are
recognised in other comprehensive income. At
31 December 2019, all adjustments of financial
instruments were recognised in other
comprehensive income. Fair value adjustments
of loans designated as strategic intra-group
loans are also recognised in other
comprehensive income.
The fair value of derivatives used as net
investment hedges recognised at 31 December
2019 amounted to DKK -91m (2018: DKK
-75m). The closing balance in the equity
reserve for currency translation of hedges of
net investments amounted to DKK -1,628m
(2018: DKK -1,382m). Positive fair values of
derivatives are recognised as other receivables
and negative values as other liabilities.
Net investment hedges
Currency profile of borrowings
Before and after derivative financial instruments
DKK million
2019
CHF
DKK
EUR
RUB
USD
Other
Total
Total 2018
Original
principal
142
124
Effect
of swap
1,439
-120
23,805
-5,580
122
130
668
24,991
23,983
386
1,947
1,928
-
-
After
swap
1,581
4
18,225
508
2,077
2,596
24,991
23,983
DKK million
RUB
CNY
MYR
HKD
CHF
GBP
NOK
SEK
PLN
SGD
USD
Other
Total
Hedging of investment,
amount in local currency
Intra-group loans,
amount in local currency
Other comprehensive
income (DKK)
Average hedged rate
Fair value of derivatives
Fair value of derivatives
2019
2018
2019
2018
2019
2018
2019
-
2018
-
-1,500
-1,250
-318
-
-273
-
-337
-
-273
-
-
-
-
-27
-
59
-
-
-
721
-
67
-1,300
-1,300
-
-
-135
-135
3,000
3,335
-
3,000
5,495
-
-
-
-
-
-
-
-154
-153
-28
-
-
-
-77
-63
-35
22
-50
30
-
-
-57
-30
44
-74
-8
-25
2019
-
2018
-
0.9257
0.9134
1.5656
1.5411
-
-
6.7148
6.3827
-
-
0.7398
0.7686
-114
-301
-
-
-8
-33
3
-
2
-18
-
-2
1.7346
1.7010
-
-
-
-
-
-
-325
-469
Asset
Liability
Asset
Liability
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-20
-11
-
-45
-
-14
-
-1
-
-
-
-
-
2
-
-
-
31
-
-
-
-
-
-
-25
-4
-
-76
-
-
-
-3
-
-
-
-91
33
-108
SECTION 4.6 (CONTINUED)
FOREIGN EXCHANGE
RISK RELATED TO
NET INVESTMENTS
AND FINANCING
ACTIVITIES
4.6.3 EXCHANGE RATE RISK ON CASH
AND BORROWINGS
The main principle for funding of subsidiaries is
that cash, loans and borrowings should be in
local currency or hedged to local currency to
avoid foreign exchange risk. However, in some
Group entities, net debt is denominated in a
currency other than the functional currency of
the local entity without the foreign exchange
risk being hedged. This applies primarily to a
few entities in Eastern Europe that hold cash
and loans in EUR and USD and in this way
obtain proxy hedging of the foreign exchange
risk associated with the purchase of goods in
foreign currency in these markets.
Group entities, net debt is denominated in a
currency other than the functional currency of
the local entity without the foreign exchange
risk being hedged. This applies primarily to a
few entities in Eastern Europe that hold cash
and loans in EUR and USD and in this way
obtain proxy hedging of the foreign exchange
risk associated with the purchase of goods in
foreign currency in these markets.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
93
SENSITIVITY ANALYSIS
An adverse development in the exchange rates
would, all other things being unchanged, have
had the hypothetical impact on the income
statement and other comprehensive income
(OCI) for 2019 illustrated in the tables. The
calculations are made on the basis of items in
the statement of financial position at 31
December 2019.
Exchange rate sensitivity - other comprehensive income
2019
DKK million
NOK/DKK
SEK/DKK
PLN/DKK
CHF/DKK
RUB/DKK
GBP/DKK
Other
Total
Average
hedged rate
Notional
amount
Change
Effect
on OCI
Average
hedged rate
0.7383
0.7009
1.7015
6.7438
0.0991
8.3781
N/A
-680
-632
-525
-481
-287
-127
-19
5%
5%
5%
5%
10%
5%
5%
-34
-32
-26
-24
-29
-6
-1
-152
0.7707
0.7227
1.6865
6.5356
0.0894
8.3284
N/A
4.6.4 IMPACT ON FINANCIAL
STATEMENTS AND SENSITIVITY
ANALYSIS
IMPACT ON INCOME STATEMENT
For the impact of currency on operating profit
and financial items, please refer to sections 1.3
and 4.1 respectively.
IMPACT ON STATEMENT OF FINANCIAL
POSITION
Fluctuations in foreign exchange rates will
affect the level of debt, as funding is obtained
in a number of currencies. In 2019, net
interest-bearing debt decreased by DKK 14m
(2018: increased by DKK 142m) due to
changes in foreign exchange rates.
Exchange rate sensitivity - income statement
2019
DKK million
EUR/GBP
EUR/NOK
EUR/PLN
EUR/KZT
EUR/RUB
EUR/SEK
EUR/CHF
Total
2019
USD/RUB
USD/UAH
Total
EUR
receivable
EUR
payable
858
140
249
-
7
186
-4
-655
-637
-277
-8
-64
-311
-239
USD
receivable
-
-
USD
payable
-2
-1
EUR
cash
-332
311
32
291
211
96
229
USD
cash
289
161
Gross
exposure
Exposure,
net of hedging
% change
Effect
on P/L
-129
-186
4
283
154
-29
-14
-129
-186
4
283
154
-29
-14
5%
5%
5%
10%
10%
5%
5%
Gross
exposure
Exposure,
net of hedging
287
160
287
160
% change
10%
10%
-6
-9
-
28
15
-1
-1
26
Effect
on P/L
29
16
45
2018
Effect
on OCI
-35
-26
-23
-16
-24
-8
3
-129
2018
Effect
on P/L
7
-11
5
21
14
5
-2
39
2018
Effect
on P/L
33
16
49
SECTION 4.6 (CONTINUED)
FOREIGN EXCHANGE
RISK RELATED TO
NET INVESTMENTS
AND FINANCING
ACTIVITIES
Income statement
The hypothetical impact ignores the fact that
the subsidiaries’ initial recognition of revenue,
cost and debt would be similarly exposed to
the exchange rate developments.
Other comprehensive income
Other comprehensive income is affected by
changes in the fair value of currency derivatives
designated as cash flow hedges of future
purchases and sales.
Applied exchange rates
DKK
Swiss franc (CHF)
Chinese yuan (CNY)
Euro (EUR)
Pound sterling (GBP)
Laotian kip (LAK)
Norwegian krone (NOK)
Polish zloty (PLN)
Russian rouble (RUB)
Swedish krona (SEK)
Ukrainian hryvnia (UAH)
APPLIED EXCHANGE RATES
The average exchange rate was calculated
using the monthly exchange rates weighted
according to the phasing of the revenue per
currency throughout the year.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
94
SECTION 4.7
LIQUIDITY RISK
Liquidity risk results from the Group’s potential
inability to meet the obligations associated
with its financial liabilities, for example settle-
ment of financial debt and paying suppliers.
The Group’s liquidity is managed by Group
Treasury. The aim is to ensure effective
liquidity management, which involves
obtaining sufficient committed credit facilities
to ensure adequate financial resources and, to
some extent, tapping a range of funding
sources.
CREDIT RESOURCES AVAILABLE
The Group uses the term “credit resources
available” to determine the adequacy of access
to credit facilities.
Net financial debt is used internally by Group
Treasury to monitor the Group’s credit
resources available. Net financial debt is the
Group’s net interest-bearing debt, excluding
interest-bearing assets other than cash, as
these assets are not actively managed in
relation to liquidity risk. Net financial debt is
shown in section 4.2.
Committed credit facilities and credit resources available
DKK million
2019
Current
< 1 year
Closing rate
Average rate
Total current committed loans and credit facilities
Total
committed
loans and
credit
facilities
Utilised
portion of
credit
facilities
Unutilised
credit
facilities
2018
Unutilised
credit
facilities
5,643
5,643
4,112
4,112
1,531
1,531
1,531
1,531
2019
6.8712
0.9555
7.4697
8.7664
0.0008
0.7587
1.7548
0.1077
0.7155
0.2827
2018
6.6512
0.9479
7.4673
8.2719
0.0008
0.7487
1.7355
0.0940
0.7266
0.2355
2019
6.7135
0.9654
7.4659
8.5218
0.0008
0.7582
1.7377
0.1033
0.7049
0.2594
2018
6.4526
0.9562
7.4529
8.4234
0.0007
0.7775
1.7471
0.1007
0.7256
0.2347
Non-current
1-2 years
2-3 years
3-4 years
4-5 years
> 5 years
412
5,729
3,821
22,404
3,452
412
5,729
3,821
7,465
3,452
Total non-current committed loans and credit facilities
35,818
20,879
Cash and cash equivalents
-
-
-
14,939
-
14,939
5,222
Current portion of utilised credit facilities
-
-
-4,112
-
15,009
-
-
-
15,009
5,589
-7,233
Credit resources available (total non-current
committed loans and credit facilities - net debt)
16,049
13,365
SECTION 4.7 (CONTINUED)
LIQUIDITY RISK
At 31 December 2019, the Group had total
credit resources available of DKK 16,049m
consisting of cash and cash equivalents of DKK
5,222m plus committed unutilised non-current
credit facilities of DKK 14,939m and less
utilisation of current facilities of DKK -4,112m.
Including current credit facilities of DKK
1,531m, total committed unutilised credit
facilities amounted to DKK 16,470m.
Credit resources available increased by DKK
2.7bn compared with 2018, primarily due to
the issuance of a EUR 400m bond. The
proceeds were used to partly refinance short-
term borrowings.
The credit resources available and the access to
unused committed credit facilities are
considered reasonable in light of the Group’s
current needs in terms of financial flexibility.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
95
In addition to efficient working capital manage-
ment and credit risk management, the Group
mitigates liquidity risk by arranging borrowing
facilities with solid financial institutions.
The Group uses cash pools for day-to-day
liquidity management in most of the entities in
Western Europe, as well as intra-group loans
to subsidiaries. Eastern Europe and Asia are
less integrated in terms of cash pools, and
liquidity is managed via intra-group loans.
The table lists the contractual maturities of
financial liabilities, including estimated interest
payments and excluding the impact of netting
agreements, and thus summarises the gross
liquidity risk.
The risk implied by the values reflects the one-
sided scenario of cash outflows only. Trade
payables and other financial liabilities originate
from the financing of assets in ongoing
operations, such as property, plant and
equipment, and investments in working capital,
for example inventories and trade receivables.
The nominal amount/contractual cash flow of
the gross financial debt was DKK 153m higher
(2018: DKK 125m higher) than the carrying
amount. The difference between the nominal
amount and the carrying amount comprises
differences between these amounts at initial
recognition, which are treated as a cost that is
capitalised and amortised over the duration of
the borrowings.
The interest expense is the contractual cash
flows expected on the gross financial debt
existing at 31 December 2019.
The cash flow is estimated based on the
notional amount of the above-mentioned
borrowings and expected interest rates at
year-end 2019 and 2018. Interest on debt
recognised at year-end 2019 and 2018, for
which no contractual obligation exists (current
borrowing and cash pools), has been included
for a two-year period. The synthetic interest
on lease liabilities has also been included for a
two-year period. The interest applied to the
part of the debt where no contractual
obligation exists is 1% (2018: 2%).
Maturity of financial liabilities
DKK million
2019
Contractual
cash flows
Maturity
< 1 year
Maturity
> 1 year
< 5 years
Maturity
> 5 years
Carrying
amount
Time to maturity for non-current borrowings
Derivative financial instruments
Derivative financial instruments, payables
252
252
-
-
-
DKK million
2019
Issued bonds
Bank borrowings
Lease liabilities
Other non-current borrowings
Total
Total 2018
1-2 years
2-3 years
3-4 years
4-5 years
> 5 years
Total
Interest expenses
Non-derivative financial instruments
Gross financial debt
5,587
3,712
7,424
2,950
19,673
Trade payables and other liabilities
-
24
388
-
412
21
19
123
-
13
94
2
-29
70
-
5,729
3,821
7,465
-5
5,595
3,712
-
490
12
3,452
7,427
27
Contingent liabilities
1,165
Contingent considerations
14
Non-derivative financial instruments
54,940
23,635
27,696
20,879
Financial liabilities
16,750
Financial liabilities 2018
55,192
23,887
27,696
50,630
26,234
16,837
25,144
1,684
18,694
395
9,023
4,112
431
18,694
395
17,542
1,134
-
-
3
9,020
3,490
24,991
119
-
-
-
3,609
3,609
7,559
N/A
18,694
395
9,023
-
-
-
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
96
SECTION 4.8
DERIVATIVE
FINANCIAL
INSTRUMENTS
The Group enters into various derivative
financial instruments to hedge foreign
exchange and commodity risks and seeks to
apply hedge accounting when this is possible.
Hedging of future, highly probable forecast
transactions is designated as cash flow hedges.
Fair value adjustments of derivative financial
instruments that are not designated either as
net investment hedges or as cash flow hedges
are recognised in financial income and
expenses.
The Group monitors the cash flow hedge
relationships twice a year to assess whether
the hedge is still effective.
Positive fair values of derivatives are recognised
as other receivables and negative values as
other payables.
The fair value of derivatives classified as cash
flow hedges is presented in the cash flow
hedge section below.
Cash flow hedges comprise aluminium hedges,
where the hedged item is aluminium cans that
will be used in a number of Group entities in
2020, and currency forwards entered into to
cover the foreign exchange risk on transactions
expected to take place in 2020 and 2021.
The impact on other comprehensive income
from exchange rate instruments relates to
hedges of Group entities’ purchases and sales
in currencies other than their functional
currencies. The impact on other comprehensive
income from other instruments relates to
hedges of Group entities’ exposure to changes
in aluminium prices.
The closing balance in the equity reserve for
hedging of cash flow hedges for which hedge
accounting is no longer applied was DKK
-837m (2018: DKK -837m).
Cash flow hedges
DKK million
2019
Exchange rate instruments
Other instruments
Total
2018
Exchange rate instruments
Other instruments
Total
Financial derivatives not designated as hedging instruments (economic hedges)
Other
comprehen-
sive income
Fair value
receivables
Fair value
payables
Fair value,
net
-60
62
2
-31
-140
-171
-
-
-
18
4
22
-56
-24
-80
-13
-89
-102
-56
-24
-80
5
-85
-80
Expected recognition
DKK million
2020
-56
-24
-80
2019
4
-74
-70
2019
2021
Exchange rate instruments
-
-
-
Ineffectiveness
Total
2018
2020
Exchange rate instruments
1
Other instruments
-11
Ineffectiveness
-10
Total
Income
statement
Fair value
receivables
Fair value
payables
Fair value,
net
81
7
88
-40
-3
-11
-54
56
-
56
57
-
-
57
-13
-
-13
-55
-
-
-55
43
-
43
2
-
-
2
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
97
Derivatives designated as and qualifying for
recognition as a cash flow hedge of financial
investments are recognised in other comprehensive
income. On complete or partial disposal of the
financial investment, the portion of the hedging
instrument that is recognised in other comprehensive
income and relates to that financial investment is
recognised in the income statement when the gain or
loss on disposal is recognised.
Hedges of net investments in foreign subsidiaries,
associates and joint ventures are accounted for in the
same way as cash flow hedges.
SECTION 4.8 (CONTINUED)
DERIVATIVE
FINANCIAL
INSTRUMENTS
ACCOUNTING ESTIMATES
AND JUDGEMENTS
When entering into financial instruments,
management assesses whether the instrument is an
effective hedge of recognised assets and liabilities,
expected future cash flows or financial investments.
The effectiveness of recognised hedging instruments
is assessed at least twice a year.
Fair values of derivative financial instruments are
calculated on the basis of level 2 input consisting of
current market data and generally accepted valuation
methods. Internally calculated values are used, and
these are compared with external market quotes on a
quarterly basis. For currency and aluminium
derivatives, the calculation is as follows:
a) The forward market rate is compared to the
agreed rate on the derivatives, and the difference
in cash flow at the future point in time is
calculated.
b) The amounts are discounted to present value.
When entering into a contract, management assesses
whether the contract contains embedded derivatives
and whether they meet the criteria for separate
classification and recognition. The Group currently
does not have any embedded derivatives that meet
the criteria for separate classification and recognition.
ACCOUNTING
POLICIES
Derivative financial instruments are initially
recognised at fair value on the trade date and
subsequently remeasured at their fair value at the
reporting date.
The accounting for subsequent changes in fair value
depends on whether the derivative is designated as
one of:
• Fair value hedges of the fair value of recognised
assets or liabilities
• Cash flow hedges of particular risks associated with
the cash flow from forecast transactions
• Net investment hedges of currency fluctuations in
subsidiaries, associates or joint ventures.
The fair values of derivative financial instruments are
presented in other receivables or payables, and
positive and negative values are offset only when the
Group has the right and the intention to settle several
financial instruments net.
Changes in the fair value of a fair value hedge and of
derivative financial instruments not designated in a
hedge relationship are recognised in financial income
or expenses in the income statement.
Changes in the effective portion of the fair value of
derivative financial instruments that are designated
and qualify as a cash flow hedge are recognised in
the hedging reserve within equity. When the hedged
transaction materialises, amounts previously
recognised in other comprehensive income are
transferred to the same item as the hedged item.
SECTION 5
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
98
ACQUISITIONS, DISPOSALS,
ASSOCIATES AND JOINT VENTURES
Cambrew
Acquisition of the remaining 25%
shareholding in the Cambrew Group
bringing the shareholding to 100%.
Jing-A
Acquisition of a 49% non-controlling
interest in the Chinese craft brewery,
including the rights to distribute the brand
in China.
Ukraine
Acquisition of the remaining 1.2%
shareholding in Carlsberg Ukraine bringing
the shareholding to 100%.
SECTION 5.1
INVESTMENT MODEL
AND RISKS
MARKET ACCESS
In the beer industry, access to local markets is
highly dependent on establishing good
relationships with customers in the on- and
off-trade channels, national distributors, local
suppliers and relevant authorities governing the
beverage industry. Often, the most efficient
way of establishing such relations is by
acquiring a local brewer or engaging with a
local partner that already has the relevant
relationships.
Therefore, when the Group expands its
business into new markets, it often does so in
collaboration with a local partner. Such a
partnership can have different legal forms and
impacts the consolidated financial statements
to a varying degree accordingly.
INVESTMENT MODEL
Entering into a partnership can reduce the
financial exposure and mitigate the business
risks associated with entering new markets.
The financial exposure, however, varies
depending on the structure of the partnership.
Business and financial success, and the related
risks, depend on the ability of the Group and
the local partner to create a strong and aligned
cooperation.
In some markets, the Group enters as a non-
controlling shareholder, providing a degree of
financing and contributing knowledge of the
beer industry, but leaves the controlling
influence with the partner. Other investments
are structured as joint ventures, where the
Group and the local partner jointly make the
operational decisions and share strategic and
tactical responsibility.
More commonly, the Group structures its
partnerships such that it exercises management
control, usually by way of a majority of the
voting rights, whereby the investment is fully
consolidated. Such partnerships are just as
important as other types of partnership to be
successful in the local markets, but mean that
the Group has increased financial exposure.
Investments in businesses in which the Group
exercises management control often involve
put and/or call options or a similar structure.
IMPACT ON FINANCIAL STATEMENTS
Investments in partnerships where the Group is
the non-controlling shareholder and joint
ventures are consolidated in the financial
statements using the equity method. The
accounting risks associated with these
governance models are limited to the
investment, the proportionate share of the net
profit of the business and any specific
additional commitments to banks or other
parties, as well as specific guarantees or loans
the Group provides to the partnership.
In businesses where the Group exercises
management control, the consolidated
financials are impacted by full exposure to the
earnings and other financial risks. From an
accounting point of view, the Group treats any
put options held by partners in such entities as
if they had already been exercised by the
partner, i.e. anticipating that the acquisition will
occur. The accounting impact is that the non-
controlling interests are not recognised, and no
part of net profits or equity is attributed to
them. Instead, the dividends the partner
receives from the business are – for accounting
purposes – classified as financial expenses.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
99
SECTION 5.1 (CONTINUED)
INVESTMENT MODEL
AND RISKS
SECTION 5.2
ACQUISITIONS AND
DISPOSALS
Common to all partnerships is the risk of
disagreement and, ultimately, dissolution.
Disagreements with partners on the operational
management and strategic directions of
partnerships may limit our ability to manage
the growth and risk profile of our business. The
Group continuously seeks to promote a fair and
mutually beneficial development of the
partnerships, which is crucial for this
development to be successful. However, in
certain partnerships the partners’ pursuit of
goals and priorities that are different from
those of the Group might result in
disagreements, affecting operational and
financial performance. Such different goals and
priorities can become more pronounced in the
period before a partner has the right to exit the
partnership.
A dissolution will initially impact the accounting
treatment of an investment. The accounting
treatment will depend on whether the Group or
our partner is exiting the business. In the long
term, however, the impact can be significant to
the operation of the local entity and the
collaboration with customers, distributors,
authorities etc. if the partner was instrumental
in managing these relationships. Therefore, the
risk of a partnership dissolution may have a
negative impact on the underlying business and
the financial performance recognised in the
consolidated financial statements.
ACQUISITION OF ENTITIES
In 2019, the Group completed a minor
acquisition of DKK 18m, cf. section 5.4.
The Cambrew Group
In 2018, Carlsberg gained control of the
Cambrew Group (Cambodia) through the
acquisition of an additional 25% of the shares,
giving Carlsberg a 75% ownership interest. Part
of the consideration for the acquisition was a
written put option on the remaining 25%
ownership interest. This resulted in the
acquisition of the remaining 25% in a separate
transaction in October 2019. The acquisition
did not impact goodwill.
The acquisition of the Cambrew Group was
carried out to further strengthen the Group’s
presence in the Asia region. The calculated
goodwill represented staff competences and
synergies from expected optimisations of sales
and distribution, supply chain and procurement,
and the increase in market share.
The fair values of the identifiable assets and
liabilities at the date of acquisition in 2018
were provisionally estimated and disclosed in
the Annual Report for 2018. In 2019, the
values were finalised, primarily impacted by the
recognition of brands being separated from
goodwill and minor changes to the carrying
amount of inventories, receivables, payables
and provisions. Comparative figures have not
been restated.
Acquisition of the Cambrew Group
DKK million
Consideration paid
Fair value of contingent consideration
Fair value of previously held investment
Total cost of acquisition
Acquired assets and liabilities
Goodwill
Brands
Property, plant and equipment
Financial assets
Inventories
Trade and other receivables
Cash and cash equivalents
Provisions and retirement benefits
Deferred tax liabilities
Trade payables
Other payables
Acquired assets and liabilities
Non-controlling interests
Acquired assets and liabilities attributable
to shareholders in Carlsberg A/S
2018
1,349
1,061
843
3,253
2,022
301
1,482
46
83
45
353
-540
-175
-271
-90
3,256
-3
3,253
ACQUISITION OF NON-CONTROLLING
INTERESTS
In 2019, the Group acquired the 1.2% non-
controlling interest in Carlsberg Ukraine and
the remaining 25% non-controlling interest in
Cambrew.
In 2018, the non-controlling interest in
Olympic Brewery (Greece) exercised the put
option on the remaining 49% shareholding, and
a non-controlling interest in Brewery Alivaria
(Belarus) exercised one half of a put option on
21% of the shares.
CASH FLOW
Cash flow to acquire shareholdings in
associates and when gaining control of
subsidiaries is included in financial investments,
while the cash flow on acquisition of an
additional shareholding in a subsidiary, i.e.
acquiring non-controlling interests, is
recognised in financing activities.
Elements of cash consideration paid/received
DKK million
2019
2018
Consideration received/paid,
subsidiaries, net
Consideration received/paid,
associates
Cash and cash equivalents
acquired/disposed of
Total cash consideration
received/paid, net
- of which consideration
paid for entities acquired
- of which consideration
received for entities disposed
-18
-1,327
-41
-1,491
18
353
-41
-2,465
-18
-1,349
-
46
Cash flow from acquisition of shareholdings
Cash flow from acquisitions,
net, included in investing
activities
Consideration paid for
acquisition of NCI
Total
-41
-2,465
-1,670
-1,711
-355
-2,820
In 2019, the consideration paid to acquire the
remaining shareholding in Cambrew was
recognised as cash flow from financing
activities of DKK 1.6bn, while the consideration
paid when gaining control in 2018 was
included as cash flow from financial
investments of DKK 1.0bn. The total
consideration for the shares in the Cambrew
Group thereby amounted to DKK 2.6bn.
SECTION 5.2 (CONTINUED)
ACQUISITIONS
AND DISPOSALS
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Assessment of control
The classification of entities where Carlsberg controls
less than 100% of the voting rights is based on an
assessment of the contractual and operational
relationship between the parties. This includes
assessing the conditions in shareholder agreements,
contracts etc. Consideration is also given to the extent
to which each party can govern the financial and
operating policies of the entity, how the operation of
the entity is designed, and which party possesses the
relevant knowledge and competences to operate the
entity.
Another factor relevant to this assessment is the
extent to which each of the parties can direct the
activities and affect the returns, for example by
means of rights, reserved matters or casting votes.
Remeasurement of shareholding held
before a step acquisition
The fair value of the shareholding already held before
the acquisition is measured as the net present value
of expected future cash flows (value in use). The
expected cash flows are based on budgets and
business plans for the next three years and
projections for subsequent years as well as
management’s expectations for the future
development following gain of control of the entity.
Key parameters are revenue growth, operating
margin, future capital expenditure and growth
expectations beyond the next three years. As the risk
associated with the timing and amount of cash flows
is not included in the forecast cash flows for newly
acquired entities, the forecast future cash flows are
discounted using a weighted average cost of capital
(WACC).
Purchase price allocation
For acquisitions of entities, the assets, liabilities and
contingent liabilities of the acquiree are recognised
using the acquisition method. The most significant
assets acquired generally comprise goodwill, brands,
property, plant and equipment, receivables and
inventories.
No active market exists for the majority of the
acquired assets and liabilities, in particular in respect
of acquired intangible assets. Accordingly,
management makes estimates of the fair value of
acquired assets, liabilities and contingent liabilities.
Depending on the nature of the item, the determined
fair value of an item may be associated with
uncertainty and possibly adjusted subsequently.
The unallocated purchase price (positive amount) is
recognised in the statement of financial position as
goodwill and allocated to the Group’s cash-
generating units.
Brands
The value of the brands acquired and their expected
useful life are assessed based on the individual
brand’s market position, expected long-term
developments in the relevant markets and
profitability. The estimated value includes all future
cash flows associated with the brand, including the
related value of customer relations etc.
Management determines the useful life based on the
brand’s relative local, regional and global market
strength, market share, and the current and planned
marketing efforts that are helping to maintain and
increase its value. When the value of a well-
established brand is expected to be maintained for an
indefinite period in the relevant markets, and these
markets are expected to be profitable for a long
period, the useful life of the brand is determined to be
indefinite.
Brands are measured using the relief from royalty
method, under which the expected future cash flows
are based on key assumptions about expected useful
life, royalty rate, growth rate and a theoretically
calculated tax effect. A post-tax discount rate is used
that reflects the risk-free interest rate with the
addition of a risk premium associated with the
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
100
particular brand. The model and assumptions applied
are consistent with those used in impairment testing,
and are described in further detail in section 2.2.3.
liabilities, and accordingly the allocation of goodwill.
The goodwill is not deductible for tax purposes.
Brands
The value of the Angkor brand was estimated using a
royalty rate of 3%, a discount rate of 8% and a growth
rate of 3%. The brand is assumed to have an
indefinite useful life.
Customer agreements and portfolios
No customer relationships were recognised in the
purchase price allocation for the Cambrew Group.
Property, plant and equipment
The fair value and expected useful life of brewery
equipment and related buildings have been
determined with assistance from leading external
engineering experts in the brewery industry.
Receivables
Receivables consist primarily of trade receivables and
are recognised at the amount that is expected to be
collected.
Liabilities and contingent liabilities
Potential liabilities related to tax, duties, VAT and
other disputes and lawsuits were identified and
measured. Potential legal cases were evaluated and
provisions recognised based on the expected outcome
of any identified potential claim.
Customer agreements and portfolios
The value of acquired customer agreements and
customer portfolios is assessed based on the local
market and trading conditions. For most entities,
there is a close relationship between brands and
sales. Consumer demand for beer and other
beverages drives sales, and therefore the value of a
brand is closely linked to consumer demand, while
there is no separate value attached to customers
(shops, bars etc.), as their choice of products is driven
by consumer demand. The relationship between
brands and customers is carefully considered so that
brands and customer agreements are not both
recognised on the basis of the same underlying cash
flows.
Property, plant and equipment
The fair value of land and buildings, and standard
production and office equipment is based, as far as
possible, on the fair value of assets of similar type
and condition that may be bought and sold in the
open market.
Property, plant and equipment for which there is no
reliable evidence of the fair value in the market (in
particular breweries, including production equipment)
are valued using the depreciated replacement
method.
This method is based on the replacement cost of a
similar asset with similar functionality and capacity.
The calculated replacement cost is then reduced to
reflect functional and physical obsolescence. The
expected synergies and the user-specific intentions
for the expected use of assets are not included in the
determination of the fair value.
Acquisition of the Cambrew Group
Purchase price allocation
Management believes that the purchase price for the
Cambrew Group accounted for in the consolidated
financial statements reflects the best estimate of the
total fair value of the business and the proportionate
value of identified assets, liabilities and contingent
recognised in the opening balance of equity, and the
comparative figures are restated accordingly if the
amount is material.
Changes in estimates of contingent purchase
considerations are recognised in the income
statement under special items, unless they qualify for
recognition directly in equity.
Disposals
Gains or losses on the disposal or liquidation of
subsidiaries, associates and joint ventures are stated
as the difference between the sales price and the
carrying amount of net assets (including goodwill) at
the date of disposal or liquidation, foreign exchange
adjustments recognised in other comprehensive
income, and costs to sell or liquidation expenses.
SECTION 5.2 (CONTINUED)
ACQUISITIONS
AND DISPOSALS
ACCOUNTING
POLICIES
Acquisitions
The acquisition date is the date when the Group
effectively obtains control of an acquired subsidiary
or significant influence over an associate or a joint
venture.
The cost of a business combination comprises the fair
value of the consideration agreed upon, including the
fair value of consideration contingent on future
events.
In a step acquisition, the Group gains control of an
entity in which it already held a shareholding. The
shareholding held before the step acquisition is
remeasured at fair value at the acquisition date,
added to the fair value of the consideration paid for
the shareholding acquired in the step acquisition and
accounted for as the total cost of the shareholding in
the acquired entity. The gain or loss on the
remeasurement is recognised in the income statement
under special items.
Goodwill and fair value adjustments in connection
with the acquisition of an entity are treated as assets
and liabilities belonging to the foreign entity and
translated into the foreign entity’s functional currency
at the exchange rate at the transaction date.
The acquired entities’ identifiable assets, liabilities and
contingent liabilities are measured at fair value at the
acquisition date.
Identifiable intangible assets are recognised if they
are separable or arise from a contractual right.
Deferred tax on revaluations is recognised.
The identifiable assets, liabilities and contingent
liabilities on initial recognition at the acquisition date
are subsequently adjusted up until 12 months after
the acquisition. The effect of the adjustments is
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
101
SECTION 5.3
CONTINGENT
CONSIDERATIONS
Contingent considerations relate to options
held by non-controlling interests in subsidiaries
to sell their shares to the Group.
At the end of the reporting period, the
contingent consideration primarily related to
put options on the shares in Carlsberg South
Asia Pte Ltd (the parent company holding
100% and 90% of the shares in the businesses
in India and Nepal respectively), on the shares
in Brewery Alivaria, Belarus, and on the shares
in a craft brewery in Western Europe.
In 2019, the remaining outstanding shares in
Caretech Limited (the parent company in the
Cambrew Group) were acquired. The related
contingent consideration was subsequently
derecognised.
In accordance with the Group’s accounting
policy, shares subject to put options are
consolidated as if the shares had already been
acquired. The ownership percentage at which
these subsidiaries are consolidated therefore
differs from the legal ownership interest
retained by the Group. Both the legal and the
Contingent considerations
DKK million
Contingent considerations at 1 January
Movements, net
Contingent considerations at 31 December
consolidated ownership are stated in section
10.
The carrying amount of contingent
considerations is determined in accordance with
the terms of the agreements made with the
holders of the options. Therefore, not all are
measured at fair value.
Interest rates in the range of 8.1-9.8% and
residual growth rates in the range of 4.0-4.5%
were applied in the valuation of contingent
considerations.
Movements during the year comprise
acquisition of entities and fair value
adjustments of contingent considerations, net
of exercised put options during the year.
A loss of DKK 526m was recognised in equity
on exercise of put options in 2019 (2018: DKK
63m).
Of the contingent considerations, DKK 9,020m
(2018: DKK 6,168m) is expected to fall due
within one to five years whereas the rest will
fall due within 12 months. The majority of the
contingent considerations are expected to fall
due within the next few years.
2019
6,168
2,855
9,023
2018
3,820
2,348
6,168
SECTION 5.3 (CONTINUED)
CONTINGENT
CONSIDERATIONS
SECTION 5.4
ASSOCIATES AND
JOINT VENTURES
Despite the legal 51% ownership share in
Myanmar Carlsberg, the entity is classified as
an associate, due to the structure of the
agreement with the partner.
Investments in associates and joint ventures
include the businesses in Portugal (60%) and
Myanmar (51%) and five associates in China
(each 50%). The total investment in these
associates amounted to DKK 2,658m at 31
December 2019 (2018: DKK 2,697m).
Profit after tax more than doubled in 2019,
mainly due to increased ownership of the
associates in Portugal having full impact in
2019.
The Group acquired the remaining 35%
shareholding in the Acrospires Group,
increasing the ownership to 100%. As a result,
the Group now exercises management control
of the business, which has been fully
consolidated since 1 July 2019.
In Portugal, the Group's direct and indirect
ownership of Super Bock totals 60%.
Nevertheless, Super Bock is an associate of the
Group due to the ownership structure. Please
refer to section 10 of the consolidated financial
statements for details regarding the ownership.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The fair value of contingent considerations is
calculated on the basis of level 3 input consisting of
non-observable data, such as entity-specific discount
rates and industry-specific expectations of price
developments, and generally accepted valuation
methods, including discounted cash flows and
multiples.
Estimates are based on updated information since
initial recognition of the contingent consideration,
including new budgets and sales forecasts, discount
rates etc. The assumptions applied are in line with
those used in the impairment tests as described in
section 2.2, but reflecting the different models and
valuation techniques needed.
ACCOUNTING
POLICIES
On acquisition of non-controlling interests, i.e.
subsequent to the Group obtaining control, acquired
net assets are not measured at fair value. The
difference between the cost and the non-controlling
interests’ share of the total carrying amount, including
goodwill, is transferred from the non-controlling
interests’ share of equity to equity attributable to
shareholders in Carlsberg A/S. The amount deducted
cannot exceed the non-controlling interests’ share of
equity immediately before the transaction.
On disposal of shareholdings to non-controlling
interests, the difference between the sales price and
the share of the total carrying amount, including
goodwill acquired by the non-controlling interests, is
transferred from equity attributable to shareholders in
Carlsberg A/S to the non-controlling interests’ share
of equity.
Fair value adjustments of put options granted to non-
controlling interests are recognised directly in the
statement of changes in equity.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
102
ACCOUNTING
POLICIES
Investments in associates and joint ventures are
recognised according to the equity method, which
entails measurement at cost and adjustment for the
Group’s share of the profit or loss and other
comprehensive income of the associate after the date
of acquisition. The share of the result must be
calculated in accordance with the Group’s accounting
policies. The proportionate share of unrealised intra-
group profits and losses is eliminated. Investments in
associates and joint ventures with negative net asset
values are measured at DKK 0.
If the Group has a legal or constructive obligation to
cover a deficit in the associate or joint venture, the
deficit is recognised under provisions. Any amounts
owed by associates and joint ventures are written
down to the extent that the amount owed is deemed
irrecoverable.
For associates in which the Group holds an
ownership interest of less than 20%, the Group
participates in the management of the
company and is therefore exercising significant
influence.
Fair value of investment in listed associates
DKK million
The Lion Brewery
Ceylon, Sri Lanka
2019
443
2018
406
None of the associates and joint ventures are
material to the Group.
Key figures for associates and joint ventures
DKK million
2019
Associates
Joint ventures
Total
2018
Associates
Joint ventures
Total
Carlsberg Group share
Profit
after tax
Other
comprehensive
income
Total
comprehensive
income
Investments in
associates and
joint ventures
278
-
278
131
-1
130
4
-
4
4
-
4
282
-
282
135
-1
134
4,366
-2
4,364
4,564
-2
4,562
SECTION 6
TAX
2,751m
INCOME TAX (DKK)
Up from DKK 2,386m in 2018.
26.9%
TAX RATE
Down from 28.0% in 2018.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
103
If the Group obtains a tax deduction on computation
of the taxable income in Denmark or in foreign
jurisdictions as a result of share-based payment
programmes, the tax effect of the programmes is
recognised in tax on profit/loss for the year.
However, if the total tax deduction exceeds the total
tax expense, the tax benefit of the excess deduction is
recognised directly in equity.
SECTION 6.1
INCOME TAX
The nominal weighted tax rate for the Group is
calculated as domestic tax rates applicable to
profits in the entities as a proportion of each
entity’s share of the Group’s profit before tax.
The effective tax rate for the Group of 26.9%
(2018: 28.0%) was negatively impacted by
withholding taxes (particularly on dividends),
non-capitalised tax assets and non-deductible
expenses.
It is not possible to deduct all fair value
adjustments that arise in Denmark due to thin
capitalisation rules. Tax on such adjustments
therefore fluctuates from year to year.
ACCOUNTING
POLICIES
Income tax comprises current tax and changes in
deferred tax for the year, including changes as a
result of a change in the tax rate. The tax expense
relating to the profit/loss for the year is recognised in
the income statement, while the tax expense relating
to items recognised in other comprehensive income is
recognised in the statement of comprehensive
income.
Reconciliation of the effective tax rate for the year
Nominal weighted tax rate
Change in tax rate
Adjustments to tax for prior years
Non-capitalised tax assets, net movements
Non-taxable income
Non-deductible expenses
Tax incentives etc.
Special items
Withholding taxes
Other, including tax in associates and
joint ventures
Effective tax rate for the year
2019
2018
%
DKK million
%
DKK million
21.8
-0.1
0.2
1.5
-0.5
1.7
-0.3
-0.9
3.9
-0.4
26.9
2,225
-8
24
156
-54
172
-27
-87
395
-45
2,751
20.3
-
-0.5
2.8
-0.2
2.7
-0.8
0.1
3.7
-0.1
28.0
1,730
-1
-42
235
-15
230
-64
13
311
-11
2,386
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
104
SECTION 6.1 (CONTINUED)
INCOME TAX
Income tax expenses
DKK million
Income
statement
Other
comprehensive
income
Total
comprehensive
income
Income
statement
Other
comprehensive
income
Total
comprehensive
income
2019
2018
Tax for the year can be specified as follows
Current tax
Change in deferred tax and non-current tax payables during the year
Change in deferred tax as a result of change in tax rate
Adjustments to tax for prior years
Total
2,127
608
-8
24
2,751
5
-60
-
-
-55
2,132
548
-8
24
2,356
73
-1
-42
2,696
2,386
-2
-50
-
-
-52
2,354
23
-1
-42
2,334
Tax recognised in other comprehensive income
DKK million
Foreign exchange adjustments
Hedging instruments
Retirement benefit obligations
Share of other comprehensive income in associates and joint ventures
Other
Total
Recognised
item
before tax
-3,485
323
571
-4
-14
-2,609
Tax
income/
expense
-
-20
-38
-
3
-55
2019
After tax
-3,485
303
533
-4
-11
Recognised
item
before tax
Tax
income/
expense
2,754
640
-392
-4
-
-
-85
33
-
-
-52
-2,664
2,998
2018
After tax
2,754
555
-359
-4
-
2,946
SECTION 6.2
TAX ASSETS AND
LIABILITIES
Of the total deferred tax assets recognised,
DKK 312m (2018: DKK 506m) related to tax
loss carryforwards, the utilisation of which
depends on future positive taxable income
exceeding the realised deferred tax liabilities. It
is management’s opinion that these tax loss
carryforwards can be utilised.
Tax assets not recognised of DKK 678m (2018:
DKK 1,115m) primarily related to tax losses
that are not expected to be utilised in the
foreseeable future. Of these, tax losses that
will not expire amounted to DKK 472m (2018:
DKK 839m). Remaining tax losses of DKK
206m (2018: DKK 276m) will expire within five
years.
Deferred tax of DKK 54m (2018: DKK 94m)
was recognised in respect of the tax of 5%
payable on planned dividends from certain
entities in Eastern Europe.
Planned distribution of reserves for other
subsidiaries will not trigger a significant tax
liability based on current tax legislation.
Deferred tax on temporary differences relating
to investments in subsidiaries, associates and
joint ventures was recognised at DKK 180m
(2018: DKK 0m). The deferred tax plus the
additional tax on the gain of the Group’s internal
transfer of shares is expected to materialise
within the next few years.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
105
SECTION 6.2 (CONTINUED)
TAX ASSETS AND
LIABILITIES
Changes in deferred tax and non-current tax
payables for the year amounts to DKK 608m
(2018: DKK 37m), of which DKK 214m (2018:
DKK 29m) relates to the changes in deferred
tax.
Non-current tax liabilities recognised in the
statement of financial position
DKK million
Deferred tax liabilities
Non-current tax payables
Non-current tax liabilities at
31 December
2019
4,708
1,795
2018
4,021
1,638
6,503
5,659
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The Group recognises deferred tax assets, including
the expected tax value of tax loss carryforwards, if
management assesses they can be offset against
positive taxable income in the foreseeable future. This
judgement is made annually and based on budgets
and business plans for the coming years, including
planned commercial initiatives.
Carlsberg operates in a large number of tax
jurisdictions where tax legislation is highly complex
and subject to interpretation. Management makes
judgements on uncertain tax positions to ensure
recognition and measurement of tax assets and
liabilities.
ACCOUNTING
POLICIES
Current tax payable and receivable are recognised in
the statement of financial position as tax computed
on the taxable income for the year, adjusted for tax
on the taxable income of prior years and for tax paid
on account.
Deferred tax on all temporary differences between
the carrying amount and the tax base of assets and
liabilities is measured using the balance sheet liability
method. However, deferred tax is not recognised on
temporary differences relating to goodwill that is not
deductible for tax purposes or on office premises and
other items where temporary differences, apart from
business combinations, arise at the acquisition date
without affecting either profit/loss for the year or
taxable income.
Where alternative tax rules can be applied to
determine the tax base, deferred tax is measured
based on the planned use of the asset or settlement
of the liability. Deferred tax is recognised on expected
dividend payments from subsidiaries, associates and
joint ventures in countries levying withholding tax on
distributions.
Deferred tax assets related to tax loss carryforwards
are recognised under other non-current assets at the
expected value of their utilisation, either as a set-off
against tax on future income or as a set-off against
deferred tax liabilities in the same legal tax entity and
jurisdiction.
Deferred tax assets and tax liabilities are offset if the
entity has a legally enforceable right to offset current
tax liabilities and tax assets or intends either to settle
current tax liabilities and tax assets or to realise the
assets and settle the liabilities simultaneously.
Deferred tax assets are recognised only to the extent
that it is probable that the assets will be utilised.
Deferred tax is measured according to the tax rules at
the reporting date and at the tax rates applicable
when the deferred tax is expected to materialise as
current tax.
The change in deferred tax as a result of changes in
tax rates is recognised in the income statement.
Changes to deferred tax on items recognised in
other comprehensive income are, however,
recognised in other comprehensive income.
Changes to tax assets and liabilities
DKK million
Tax assets and liabilities at 1 January, net
Adjustments to prior years
Acquisition and disposal of entities
Recognised in other comprehensive income
Recognised in the income statement, net
Change in tax rate
Foreign exchange adjustments
Tax assets and liabilities at 31 December, net
Recognised as follows
Tax liabilities
Tax assets
Tax assets and liabilities at 31 December, net
Specification of deferred tax
Deferred tax assets
Deferred tax liabilities
2019
3,966
-206
40
-60
608
-8
225
2018
DKK million
3,938
Intangible assets
-7
129
-50
73
-1
Property, plant and equipment
Current assets
Provisions and retirement benefit obligations
Tax losses etc.
Total before offset
-116
Offset
4,565
3,966
Deferred tax assets and liabilities at 31 December
2019
465
432
367
1,022
1,403
3,689
-1,751
1,938
2018
358
343
316
1,217
1,192
3,426
-1,733
1,693
2019
3,680
1,790
28
26
935
6,459
-1,751
4,708
Expected to be used as follows
6,503
-1,938
4,565
5,659
Within one year
-1,693
After more than one year
3,966
Total
695
1,243
1,938
643
1,050
1,693
2,115
2,593
4,708
2018
3,413
1,861
25
8
447
5,754
-1,733
4,021
1,731
2,290
4,021
SECTION 7
STAFF COSTS AND
REMUNERATION
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
106
Pensions
Defined benefit obligations were affected
by lower interest rates across Western
Europe and by the transfer of the large
medical insurance scheme to the municipal
government in Chongqing, releasing the
Group from the obligation.
Employees
by segment (%)
2019
(2018)
SECTION 7.1
STAFF COSTS
The average number of employees increased
during 2019 due to insourcing of brand
ambassadors in Russia and the full-year effect of
Cambrew, acquired in 2018.
Staff costs increased for several entities due to
higher performance-related payouts, but this
was offset by savings generated by changes to
the employee mix.
Western Europe 28% (29%)
Asia 38% (38%)
Eastern Europe 32% (30%)
Other 2% (3%)
by function (%)
2019
(2018)
Production 32% (33%)
Sales & Distribution 59% (57%)
Administration 9% (10%)
Staff costs
DKK million
Salaries and other remuneration
Severance payments
Social security costs
Retirement benefit costs – defined contribution plans
Retirement benefit costs – defined benefit plans
Share-based payments
Other employee benefits
Total
Average number of employees
Staff costs are included in the following line items in the income statement
Cost of sales
Sales and distribution expenses
Administrative expenses
Other operating activities, net
Financial expenses (Pensions)
Special items (Restructurings)
Total
2019
8,549
88
1,344
300
32
217
60
10,590
41,248
2,866
5,575
2,192
63
-133
27
10,590
2018
8,491
75
1,294
286
203
174
91
10,614
40,837
2,720
5,348
2,433
54
23
36
10,614
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
107
SECTION 7.2
REMUNERATION
The remuneration of the Supervisory Board,
the executive directors and key management
personnel is described in detail in the
Remuneration report in the Management
review.
The remuneration of key management
personnel increased in 2019 as a result of an
increase in members of the Executive
Committee compared with 2018.
In 2019, the Supervisory Board received total
remuneration of DKK 9.59m (2018: DKK
9.35m), comprising fixed salary only.
ACCOUNTING
POLICIES
Staff costs are recognised in the financial year in
which the employee renders the related service.
The cost of share-based payments, which is
expensed over the vesting period of the programme
according to the service conditions, is recognised in
staff costs and provisions or equity, depending on
how the programme is settled with the employees.
Key management personnel comprise the Executive
Committee, excluding the executive directors. Other
management personnel included in the share-based
payment schemes comprise Vice Presidents and other
key employees in central functions as well as the
management of significant subsidiaries.
SECTION 7.3
SHARE-BASED
PAYMENTS
The Group has set up share-based incentive
programmes to attract, retain and motivate the
Group’s executive directors and other levels of
management personnel, and to align their
interests with those of the shareholders. There
is no share-based incentive programme for the
Supervisory Board.
The Group has two types of share-based
payment: share options and performance
shares. Share options entitle the holder to
purchase class B shares in Carlsberg A/S at a
predetermined price after completing three
years of service. Share options are exercisable
for five years.
Entitlement to performance shares also
requires fulfilment of service in the vesting
period (2-3 years), but does not have any
exercise price.
Instead, the shares are transferred to the
recipients based on the achievement of the
KPIs attached to the shares. Performance
shares have been awarded under three
programmes that differ in terms of KPI
structure and vesting period.
PERFORMANCE SHARES
The number of performance shares granted is
the maximum number of performance shares
that can vest. The number of shares
outstanding at the end of the period is the
number expected to vest, based on the extent
to which the vesting conditions are expected to
be met. The number of shares expected to vest
is revised on a regular basis.
Remuneration
DKK million
Fixed salary
Cash bonus
Other benefits
Special bonus¹
Remuneration settled in cash
Non-monetary benefits
Share-based payments²
Remuneration, non-monetary and share-based
Total cash and non-cash
Cees 't Hart
Executive directors
Heine Dalsgaard
Regular performance shares
In 2019, 192 employees (2018: 206
employees) across the Group were awarded
performance shares.
Key management
personnel
2019
12.6
11.4
1.1
-
25.1
0.1
24.6
24.7
49.8
2018
12.3
12.3
1.1
-
25.7
0.1
26.7
26.8
52.5
2017
12.0
9.3
1.2
-
22.5
0.1
20.6
20.7
43.2
2019
7.6
7.1
-
-
14.7
0.3
12.4
12.7
27.4
2018
7.4
7.4
-
-
14.8
0.3
13.3
13.6
28.4
2017
7.3
5.6
-
3.1
16.0
0.3
9.0
9.3
25.3
2019
26.5
23.2
7.0
1.3
58.0
0.7
21.4
22.1
80.1
2018
25.3
18.5
4.0
-
47.8
0.5
18.8
19.3
67.1
Vesting is subject to achievement of four KPIs:
total shareholder return, adjusted EPS
growth, organic revenue growth and growth in
ROIC. The average share price at vesting was
DKK 803 (2018: DKK 748). The average
contractual life at the end of 2019 was 1.5
years (2018: 1.7 years).
Funding the Journey performance shares
Funding the Journey performance shares were
granted to the executive directors in 2016 only
and vested in February 2019.
¹ Special bonus covered remuneration waived from previous employer, in total DKK 15m, paid out in 2016 and 2017.
² The amount of remuneration in the form of share-based payments in the table does not reflect the value of shares transferred to or cash equivalents received by the executive
director during the year. The amount reflects only the technical accounting charge to the income statement required by IFRS.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
108
SECTION 7.3 (CONTINUED)
SHARE-BASED
PAYMENTS
Fund & Grow performance shares
The Fund & Grow performance share
programme was set up in 2018 to align the
initiatives driven by Group management in our
SAIL’22 strategy with the interests of our
shareholders. Shares were granted to 204
employees across the Group, not including the
executive directors. Vesting is subject to
achievement of two KPIs: organic growth in
revenue and in operating profit for 2018 and
2019. The average contractual life at the end
of 2019 was 0.1 year (2018: 1.1 years).
Share option disclosures
Share options
No share options have been granted since
2016. The outstanding options are all
exercisable at the end of the reporting period.
The average contractual life was 3.6 years
(2018: 4.6 years). In 2018, the average share
price at exercise was DKK 766.
DKK million
Cost of share options
Fair value at 31 December
2019
-
54
2018
4
20
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The volatility of performance shares is based on the
historical volatility of the price of Carlsberg A/S’ class
B shares over the previous three years. For share
options, the volatility is based on similar data over
the previous eight years.
The share price and the exercise price of share
options are calculated as the average price of
Carlsberg A/S’ class B shares on Nasdaq Copenhagen
during the first five trading days after publication of
Carlsberg A/S’ financial statements.
Performance shares
31 December 2017
Granted
Forfeited/adjusted
Exercised/settled
31 December 2018
Granted
Executive
directors
137,198
66,286
-
-
203,484
61,331
Key
management
personnel
Other
management
personnel
9,023
88,919
-2,578
-6,445
88,919
147,380
556,614
-91,361
-98,972
513,661
27,569
167,918
Forfeited/adjusted/transferred
-17,353
-18,240
-64,592
-
-
Exercised/settled
31 December 2019
-58,057
189,405
Performance share disclosures
Total
293,601
711,819
-93,939
-105,417
806,064
256,818
-100,185
-58,057
Key information
Expected volatility
Risk-free interest rate
Expected dividend yield
Expected life of options, years
Regular
Fund & Grow
Funding the Journey
DKK million
Fair value at grant date
Cost of shares granted in the year
Total cost of performance shares
Cost not yet recognised
Fair value at 31 December
2019
2018
2019
167
46
104
162
510
172
46
42
120
185
-
-
112
14
361
2018
294
120
120
154
270
2019
2018
-
-
1
-
-
-
-
8
-
31 December 2017
Forfeited
Exercised
31 December 2018
26
31 December 2019
The risk-free interest rate is based on Danish
government bonds of the relevant maturity. The
expected life is based on exercise at the end of the
exercise period.
ACCOUNTING
POLICIES
The fair value of granted performance shares is
estimated using a stochastic (quasi-Monte Carlo)
valuation model of market conditions and a Black-
Scholes call option-pricing model of other conditions,
taking into account the terms and conditions upon
which the performance shares were granted.
On initial recognition of performance shares, an
estimate is made of the number of awards expected
to vest and subsequently revised for any changes.
Accordingly, recognition is based on the number of
awards that ultimately vest.
Regular
performance shares
Fund & Grow
performance
shares
2019
16.0%
0.0%
2.3%
3.0
2018
21%
0.0%
2.2%
3.0
2018
N/A
0.0%
2.2%
2.0
Exercise price
Fixed,
weighted
average
Executive
directors
Other
management
personnel
523
114,984
149,844
Number
Total
264,828
-2,825
417
529
518
518
-
-
114,984
114,984
-2,825
-147,019
-147,019
-
-
114,984
114,984
98,248
616,987
904,640
Fair value at measurement date
DKK 648-651
DKK 610-642
DKK 684
Share options
SECTION 7.4
RETIREMENT
BENEFIT
OBLIGATIONS
AND SIMILAR
OBLIGATIONS
A number of employees are covered by
retirement benefit plans. The nature of the
plans varies depending on labour market
conditions in the individual countries. Benefits
are generally based on wages, salaries and
length of employment.
Retirement benefit obligations cover both
present and future retirees’ entitlement to
retirement benefits.
DEFINED CONTRIBUTION PLANS
A defined contribution plan is a post-
employment benefit plan under which the
Group pays contributions to a separate
independent company. The Group’s legal or
constructive obligation is limited to the
contributions.
61% (2018: 58%) of the Group’s retirement
benefit costs relate to defined contribution
plans. In 2019, the expense recognised in
relation to these contributions was DKK 300m
(2018: DKK 286m).
DEFINED BENEFIT PLANS
The defined benefit plans guarantee employees
a certain level of pension benefits for life. The
pension is based on seniority and salary at the
time of retirement. The Group assumes the risk
associated with future developments in interest
rates, inflation, mortality and disability etc.
The most significant plans are in the UK and
Switzerland, representing 47% and 39%
respectively (2018: 44% and 40%), while the
eurozone countries represented 5% (2018: 6%)
of the gross obligation at 31 December 2019.
The majority of the obligations are funded,
with assets placed in independent pension
funds, mainly in Switzerland and the UK. In
some countries, primarily Germany, Sweden
and China, the obligation is unfunded. The
retirement benefit obligations for these
unfunded plans amounted to DKK 1,802m
(2018: DKK 1,873m) or 13% (2018: 15%) of
the gross obligation.
In 2019, the Group’s obligation, net, on defined
benefit plans increased by DKK 391m
compared with 2018. Changes in actuarial
assumptions across Western Europe increased
the net obligation, mainly caused by actuarial
losses of DKK 285m in the UK, DKK 175m in
Switzerland and DKK 67m in Sweden. This
effect was partially offset by a decrease in the
obligation of DKK 162m, due to the municipal
government in Chongqing assuming
responsibility for the long-term medical
insurance.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
109
Obligation, net
DKK million
2019
2018
Present
value of
obligation
Fair value
of plan
assets
Obligation,
net
Present
value of
obligation
Fair value
of plan
assets
Obligation,
net
Obligation at 1 January
12,239
9,331
2,908
13,069
9,718
3,351
Recognised in the income
statement
Current service cost
Past service cost
Net interest on the net defined
benefit obligation (asset)
Curtailments and settlements
Total
Remeasurements
Gain/loss from changes in
demographic assumptions
Gain/loss from changes in financial
assumptions
Asset ceiling
Total
Other changes
Contributions to plans
Benefits paid
Acquisition and disposal of entities,
net
Transfers
Foreign exchange adjustments etc.
Total
199
-169
256
2
288
-
-
189
-
189
199
-169
67
2
99
194
9
232
-
435
-
-
155
-
155
194
9
77
-
280
-98
-
-98
-203
-
-203
1,452
-
1,354
-
-594
1
1
482
-110
717
66
783
225
-486
-
-
430
169
735
-561
-66
571
-
-764
-312
-60
-372
-249
60
-392
-225
-108
1
1
52
-279
-
-633
3
7
122
-501
12,239
215
-522
-
-
137
-170
9,331
-215
-111
3
7
-15
-331
2,908
Obligation at 31 December
13,771
10,472
3,299
The total return on plan assets for the year amounted to DKK 906m (2018: DKK -157m).
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
110
SECTION 7.4 (CONTINUED)
RETIREMENT
BENEFIT
OBLIGATIONS
AND SIMILAR
OBLIGATIONS
The Group expects to contribute DKK 79m
(2018: DKK 76m) to the plan assets in 2020.
Plan assets do not include shares in or
properties used by Group companies.
Net actuarial loss and foreign exchange
adjustment recognised in other comprehensive
income for 2019 was DKK 681m (2018: net
gain of DKK 392m), which included a reversal
of an asset ceiling in the UK of DKK 66m
(2018: DKK -60m).
The accumulated actuarial loss and foreign
exchange adjustment recognised at 31
December 2019 was DKK 3,710m (2018: DKK
3,029m), with actuarial net losses of DKK
3,734m (2018: DKK 3,097m).
Assumptions applied
In 2019, the discount rate used for the defined
benefit plans in Western Europe was
determined by reference to market yields on
corporate bonds. In the Asian countries, where
no deep market in high-quality corporate
bonds exists, the discount rate was determined
by reference to market yields on government
bonds.
The mortality tables used in Carlsberg UK are
S3PMA/S3PFA tables for post-retirement and
AMC00/AFC00 for pre-retirement, both with
CMI_2018 projections, while the Swiss entities
use BVG 2015 GT for valuation of their
retirement benefit obligations.
Sensitivity analysis
The sensitivity analysis is based on a change in
one of the assumptions, while all other
assumptions remain constant. This is highly
unlikely, however, as a change in one
assumption would probably affect other
assumptions as well. When calculating the
obligation on the basis of a changed
assumption, the same method has been
applied as when calculating the defined benefit
obligation.
Expected maturity and duration
Defined benefit obligations are primarily
expected to mature after five years. The
expected duration of the obligations at year-
end 2019 was 20 years. The duration is
calculated using a weighted average of the
duration divided by the obligation.
Breakdown of plan assets
Shares
Bonds and other securities
Real estate
Cash and cash equivalents
Total
Assumptions applied
2019
Discount rate
Growth in wages and salaries
2018
Discount rate
Growth in wages and salaries
Sensitivity analysis
DKK million
Discount rate
Growth in wages and salaries
Mortality
DKK
million
1,004
7,080
2,231
157
10,472
2019
%
10
68
21
1
100
DKK
million
945
6,165
2,117
164
9,391
2018
%
10
65
23
2
100
CHF
0.1%
1.0%
0.8%
1.0%
UK
2.2%
2.2%
EUR
Other
0.3-0.9%
0.5-7.1%
0.0-2.7%
2.0-10.0%
Weighted
average
1.3%
1.8%
3.1%
2.4%
1.1-1.8%
0.5-7.6%
0.0-2.7%
2.0-10.0%
2.1%
2.1%
+0.5%
2019
-0.5%
-1,063
1,216
70
-65
+0.5%
-771
90
+1 year
-1 year
+1 year
580
-582
429
2018
-0.5%
942
-61
-1 year
-403
Maturity of retirement benefit obligations
DKK million
2019
2018
< 1 year
1-5 years
> 5 years
449
435
1,306
1,235
3,265
3,819
Total
5,020
5,490
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
111
If a retirement benefit plan constitutes a net asset,
the asset is recognised only if it offsets future refunds
from the plan or will lead to reduced future payments
to the plan.
Realised gains and losses on the adjustment of
retirement benefit obligations as a result of
termination of a significant number of positions in
connection with restructurings are recognised under
special items.
SECTION 7.4 (CONTINUED)
RETIREMENT
BENEFIT
OBLIGATIONS
AND SIMILAR
OBLIGATIONS
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The value of the Group’s defined benefit plans is
based on valuations from external actuaries. The
valuation is based on a number of actuarial
assumptions, including discount rates, expected return
on plan assets, expected growth in wages and
salaries, mortality and retirement benefits.
The present value of the net obligation is calculated
by using the projected unit credit method and
discounting the defined benefit plan by a discount
rate for each country. The discount rate is determined
by reference to market yields on high-quality
corporate bonds. Where high-quality corporate bonds
are not available, the market yields on government
bonds are used instead.
Mortality assumptions are based on the Group
entity’s best estimate of the mortality of plan
members during and after employment, and include
expected changes in mortality. Due to the broad
range of entities comprising the retirement benefit
obligation, several different mortality tables are used
to calculate the future retirement benefit obligation.
ACCOUNTING
POLICIES
Contributions paid to a defined contribution plan are
recognised in the income statement in the period
during which services are rendered by employees.
Any contributions outstanding are recognised in the
statement of financial position as other liabilities.
The Group’s net obligation recognised in the
statement of financial position in respect of defined
benefit plans is the present value of the defined
benefit obligation at the reporting date less the fair
value of plan assets calculated by a qualified actuary.
The present value is determined separately for each
plan by discounting the estimated future benefits that
employees have earned in return for their service in
the current and prior years.
The costs of a defined benefit plan are recognised in
the income statement and include service costs, net
interest based on actuarial estimates and financial
expectations at the beginning of the year.
Service costs comprise current service cost and past
service cost. Current service cost is the increase in the
present value of the defined benefit obligation
resulting from employee services in the current
period. Past service cost is the change in the present
value of the obligation regarding employee services in
prior years that arises from a plan amendment or a
curtailment. Past service costs are recognised
immediately, provided employees have already
earned the changed benefits.
Realised gains and losses on curtailment or
settlement are recognised under staff costs.
Interest on retirement benefit obligations and the
interest on return on plan assets are recognised as
financial income or financial expenses.
Differences between the development in retirement
benefit assets and liabilities and realised amounts at
year-end are designated as actuarial gains or losses
and recognised in other comprehensive income. As
they will never be reclassified to the income
statement, they are presented in retained earnings.
SECTION 8
OTHER DISCLOSURE
REQUIREMENTS
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
112
6,160m
Profit attributable to shareholders in
Carlsberg A/S, adjusted for special items
after tax (DKK).
41.0
Earnings per share, adjusted for special
items after tax (DKK).
SECTION 8.1
EARNINGS PER
SHARE
During 2019, the Group repurchased a total of
4.5m B shares under the share buy-back
programme, which decreased the average
number of shares by 2.1m. This increased the
adjusted earnings per share by DKK 0.5. The
improved profit for the year compared with last
year increased the adjusted earnings per share
by DKK 5.3.
For all share-based incentive instruments, the
average market price of Carlsberg B shares
exceeded the exercise price and the fair value
at the grant date. As a result, diluted earnings
per share included all share-based incentive
instruments that could potentially dilute
earnings in the future.
Earnings per share
DKK
Earnings per share of DKK 20 (EPS)
Diluted earnings per share of DKK 20 (EPS-D)
Earnings per share, adjusted (EPS-A)
Average number of shares
1,000 shares
Average number of issued shares
Average number of treasury shares
Average number of shares
Average dilutive effect of share-based incentives
Diluted average number of shares
Profit attributable to shareholders
DKK million
Consolidated profit
Non-controlling interests
Profit attributable to shareholders in Carlsberg A/S (net profit)
Special items after tax
Profit attributable to shareholders in Carlsberg A/S, adjusted
2019
43.7
43.4
41.0
2018
34.8
34.7
35.2
152,557
-2,146
150,411
817
152,557
-129
152,428
683
151,228
153,111
7,477
-908
6,569
-409
6,160
6,133
-824
5,309
50
5,359
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
113
SECTION 8.2
FEES TO AUDITORS
The following transactions took place between
the Carlsberg Foundation and the Group in
2019:
charge from the Group as part of the
sponsorship of certain events at an
accumulated value of DKK 0.2m.
which in turn corresponds to what each party
would have had to pay to have the same
deliverables provided by external parties.
Fees to auditors appointed by the
Annual General Meeting
DKK million
2019
2018
PwC including network firms
Statutory audit
Assurance engagements
Tax advisory
Other services
Total
20
1
2
7
30
19
1
1
2
23
Fees for services other than the statutory audit
of the financial statements provided by
PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab, Denmark, amounted
to DKK 8m (2018: DKK 3m), including advice
relating to information security, internal
controls, finance function and tax, other
assurance opinions and agreed-upon
procedures, as well as accounting advice.
SECTION 8.3
RELATED PARTIES
RELATED PARTIES EXERCISING CONTROL
The Carlsberg Foundation, H.C. Andersens
Boulevard 35, 1553 Copenhagen V, Denmark,
exercises control over Carlsberg A/S. The
Foundation holds 29.4% of the shares and
75.1% of the voting power in Carlsberg A/S,
excluding treasury shares.
The Carlsberg Foundation received a dividend
of DKK 18.00 per share from Carlsberg A/S,
the same as every other shareholder. The
dividend received amounted to DKK 832m.
Through its pro-rata participation in the share
buy-back programme, the Carlsberg
Foundation sold B shares at a fair value of
DKK 1.2bn to Carlsberg A/S. The Foundation
thereby reduced its shareholding to 29.4% at
31 December 2019 (2018: 30.3%). The shares
were sold back at the average weekly share
buy-back market prices.
FUNDING AND GRANTS
Carlsberg A/S received statutory grants and
further funding from the Carlsberg Foundation,
DKK 39m, for the research and development
activities at the Carlsberg Research Laboratory
(2018: DKK 38m). Of the total grants, DKK
41m (2018: DKK 26m) was deferred to be
used for research projects in the future.
The Carlsberg Foundation will contribute
around DKK 53m to support rebuilding the
Carlsberg Visitor Center and Museum to better
present the rich history and value creation of
Carlsberg.
OTHER ACTIVITIES
Carlsberg A/S held the Annual General
Meeting at Ny Carlsberg Glyptotek at a cost of
DKK 0.2m and an event for its employees at a
cost of DKK 0.5m. Furthermore, Ny Carlsberg
Glyptotek has received event products free of
The Group’s delivery of beer and soft drinks to
the Carlsberg Foundation is charged at
ordinary listing price minus a discount. In 2019,
the deliveries amounted to DKK 0.2m (total
sales of goods) (2018: DKK 0.3m).
Carlsberg A/S leases parking spaces from the
Carlsberg Foundation to provide parking for
employees at the Research Laboratory and
Visit Carlsberg. Furthermore, Carlsberg
Breweries A/S leases storage facilities in the
researcher apartments. These lease
agreements are with subsidiaries of the
Foundation. Both of the annual lease
payments amount to DKK 0.2m and the lease
terms are on market conditions.
In accordance with the Tuborg Foundation’s
entitlements as a partner of UNLEASH (a non-
profit organisation working to promote young
people’s understanding of & contribution to the
UN Sustainable Development Goals), seven
seats for an event were given to Carlsberg
talents. The total value of the seats was DKK
0.2m. Carlsberg A/S, and the Carlsberg, the
Tuborg and the New Carlsberg Foundations
participated in Folkemødet (the People’s
Democratic Festival in Bornholm). Carlsberg
A/S spent DKK 0.3m and the three
Foundations a total of DKK 1.7m on
establishing the event area.
It is estimated that the benefit for the Carlsberg
Group corresponds to the value of the other
activities provided to the Carlsberg Foundation,
OTHER RELATED PARTIES
Related parties also comprise Carlsberg A/S’
Supervisory Board and Executive Board, their
close family members and companies in which
these persons have significant influence. During
the year, there were no transactions between
these parties and the Group, except for
remuneration as disclosed in section 7 of the
consolidated financial statements.
The income statement and the statement of
financial position include the following
transactions
DKK million
2019
2018
Associates and joint ventures
Revenue
Cost of sales
Loans
Receivables
Borrowings
72
-703
241
48
-
62
-622
333
104
-7
Trade payables and other
liabilities
-2
-15
SECTION 8.4
EVENTS AFTER THE
REPORTING PERIOD
Apart from the events recognised or disclosed
in the consolidated financial statements, no
events have occurred after the reporting period
of importance to the consolidated financial
statements.
SECTION 9
BASIS FOR
PREPARATION
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
114
Changes in
2019
RECOGNITION OF LEASE
LIABILITIES
Adoption of the new IFRS leasing standard
led to recognition of lease liabilities and
identification of right-of-use assets. These
have been recognised as property, plant
and equipment as of 1 January 2019.
SECTION 9.1
SIGNIFICANT
ACCOUNTING
ESTIMATES AND
JUDGEMENTS
In preparing the consolidated financial
statements, management makes various
accounting estimates and judgements that
form the basis of presentation, recognition and
measurement of the Group’s assets, liabilities,
income and expenses. The estimates and
judgements made are based on historical
experience and other factors that management
assesses to be reliable, but that, by nature, are
associated with uncertainty and unpredictability
and may therefore prove incomplete or
incorrect.
Areas involving significant estimates and judgements:
Impairment testing, useful life and residual value Section 2
Restructurings, provisions and contingencies
Section 3
Receivables
Tax assets and liabilities
Defined benefit obligations
Acquisitions and disposals, including contingent
considerations
Section 1
Section 6
Section 7
Section 5
SECTION 9.2
GENERAL
ACCOUNTING
POLICIES
The Group’s 2019 consolidated financial
statements have been prepared in accordance
with IFRS as adopted by the EU and further
requirements in the Danish Financial
Statements Act.
The consolidated financial statements are
presented in Danish kroner (DKK), which is the
Parent Company’s functional currency, and all
values are rounded to the nearest DKK million,
except when otherwise stated.
The accounting policies set out below have
been used consistently in respect of the
financial year and the comparative figures.
DEFINING MATERIALITY
Significant items are presented individually in
the financial statements as required by IAS 1.
Other items that are considered relevant to
stakeholders and necessary for an
understanding of the Group’s business model,
including research, real estate and geographical
diversity, are also presented individually in the
financial statements.
The consolidated financial statements are
prepared as a consolidation of the financial
statements of the Parent Company, Carlsberg
A/S and its subsidiaries according to the
Group’s accounting policies.
Entities over which the Group exercises
significant influence, but which it does not
control, are considered associates. Significant
influence is generally obtained by direct or
indirect ownership or control of less than 50%
of the voting rights or participation in the
management of the company. The assessment
of whether Carlsberg A/S exercises control or
significant influence includes potential voting
rights exercisable at the reporting date. Entities
that by agreement are managed jointly with
one or more other parties are considered joint
ventures.
On consolidation, intra-group income and
expenses, shareholdings, balances and
dividends, and realised and unrealised gains are
eliminated. Unrealised gains on transactions
with associates and joint ventures are
eliminated in proportion to the Group’s
ownership share of the entity.
SECTION 9.2 (CONTINUED)
GENERAL
ACCOUNTING
POLICIES
Unrealised losses are eliminated in the same
way as unrealised gains to the extent that
impairment has not taken place.
The accounting items of subsidiaries are
included in full in the consolidated financial
statements. Non-controlling interests’ share of
subsidiaries’ profit/loss for the year and of
equity are included in the Group’s profit/loss
and equity, but are disclosed separately.
Entities acquired or established in the year are
recognised in the consolidated financial
statements from the date of acquisition or
formation. Entities disposed of or discontinued
are recognised in the consolidated income
statement until the date of disposal or
discontinuation. The comparative figures are
not restated.
FOREIGN CURRENCY TRANSLATION
A functional currency is determined for each of
the reporting entities in the Group. The
functional currency is the primary currency
used for the reporting entity’s operations.
Transactions denominated in currencies other
than the functional currency are considered
transactions denominated in foreign currencies.
On initial recognition, transactions
denominated in foreign currencies are
translated to the functional currency at the
exchange rates at the transaction date. Foreign
exchange differences arising between the
exchange rates at the transaction date and at
the date of payment are recognised as financial
income or expenses.
Receivables, payables and other monetary
items denominated in foreign currencies are
translated at the exchange rates at the
reporting date. The difference between the
exchange rates at the reporting date and at the
date at which the receivable or payable arose
or the exchange rate in the latest consolidated
financial statements is recognised as financial
income or expenses.
On recognition of entities with a functional
currency other than the presentation currency,
the income statement and statement of cash
flows are translated at the exchange rates at
the transaction date, and the statement of
financial position items are translated at the
exchange rates at the reporting date. Foreign
exchange differences arising on translation of
the opening balance of equity, and of the
income statement on the reporting date, are
recognised in other comprehensive income and
attributed to a separate translation reserve in
equity. Foreign exchange differences arising on
the translation of the proportionate share of
associates and joint ventures are likewise
recognised in other comprehensive income.
Foreign exchange adjustment of balances with
entities that are considered part of the
investment in the entity is recognised in other
comprehensive income. Correspondingly,
foreign exchange gains and losses on the part
of loans and derivative financial instruments
that are designated as hedges of investments in
foreign entities, and that effectively hedges
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
115
against corresponding foreign exchange gains
and losses on the investment in the entity, are
also recognised in other comprehensive income
and attributed to a separate translation reserve
in equity.
When the gain or loss from a complete or
partial disposal of an entity is recognised, the
share of the cumulative exchange differences
recognised in other comprehensive income is
recognised in the income statement. The same
approach is adopted on repayment of balances
that constitute part of the net investment in the
entity.
INCOME STATEMENT
The presentation of the Group’s income
statement is based on the internal reporting
structure, as IFRS does not provide a specific
disclosure requirement.
Special items are not directly attributable to
ordinary operating activities and are shown
separately in order to facilitate a better
understanding of the Group’s financial
performance.
CASH FLOW
Cash flow is calculated using the indirect
method and is based on operating profit before
special items adjusted for depreciation,
amortisation and impairment losses. Cash flow
cannot be derived directly from the statement
of financial position and income statement.
FINANCIAL RATIOS AND NON-IFRS
FINANCIAL MEASURES
The Group uses certain additional financial
measures to provide management, investors
and investment analysts with additional
measures to evaluate and analyse the
Company’s results. These non-IFRS financial
measures are defined and calculated by the
Group, and therefore may not be comparable
with other companies’ measures.
The non-IFRS financial measures disclosed in
the Annual Report are:
• Earnings per share, adjusted, and payout
ratio, adjusted
• Organic development
The Danish Finance Society does not
acknowledge use of special items and states
that adjustments of tax should be based on the
marginal tax rate. When calculating financial
measures, the Group uses operating profit
before special items as well as the effective tax
rate for measures adjusted for tax.
Other financial ratios are calculated in
accordance with the Danish Finance Society’s
online guidelines on the calculation of financial
ratios, “Recommendations and Financial
Ratios”, unless specifically stated.
SECTION 9.2 (CONTINUED)
GENERAL
ACCOUNTING
POLICIES
Glossary and calculation of key figures and financial ratios disclosed in the Annual Report
FINANCIAL RATIOS
Gross margin
EBITDA margin1
Gross profit as a percentage of revenue.
Operating margin
Operating profit before special items1 as a percentage of revenue.
Return on invested capital (ROIC)
Operating profit before special items1 adjusted for tax as a percentage of
average invested capital2 calculated as a 12-month rolling average (MAT).
Return on invested capital excluding
goodwill (ROIC excl. goodwill)
Operating profit before special items1 adjusted for tax as a percentage of
average invested capital2 excluding goodwill calculated as a 12-month rolling
average (MAT).
Effective tax rate1
Income tax as a percentage of profit before tax.
Equity ratio
Equity attributable to shareholders in Carlsberg A/S at year-end as a
percentage of total assets at year-end.
NIBD/equity ratio1
Net interest-bearing debt3 at year-end divided by total equity at year-end.
NIBD/EBITDA1
Net interest-bearing debt3 divided by operating profit before depreciation,
amortisation and impairment losses.
Interest cover1
Operating profit before special items divided by interest expenses, net.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
116
STOCK MARKET RATIOS (CONTINUED)
Payout ratio
Payout ratio, adjusted
Proposed dividend for the year as a percentage of consolidated profit,
excluding non-controlling interests.
Proposed dividend for the year on number of shares at year-end as a
percentage of consolidated profit, adjusted for special items after tax1,
excluding non-controlling interests.
Average number of shares
Number of issued shares, excluding treasury shares, as an average for the
year.
Number of shares at year-end
Total number of issued shares, excluding treasury shares, at year-end.
GLOSSARY
EBITDA1
OCI
NCI
Expression used for operating profit before depreciation, amortisation and
impairment losses.
Abbreviation for other comprehensive income.
Abbreviation for non-controlling interests.
Operating profit
Expression used for operating profit before special items1.
On-trade
Off-trade
Expression used for sale of beverages for consumption on the premises (e.g.
restaurants, hotels and bars).
Expression used for sale of beverages for consumption off the premises (e.g.
retailers).
Operating profit before depreciation, amortisation and impairment losses as a
percentage of revenue.
Market capitalisation
Number of shares at year-end multiplied by the share price.
Average number of issued shares
Number of issued shares as an average for the year.
STOCK MARKET RATIOS
Earnings per share (EPS)
Consolidated profit for the year, excluding non-controlling interests, divided by
the average number of shares.
Organic development1
Measure of growth excluding the impact of acquisitions, divestments and
foreign exchange from year-on-year comparisons.
Earnings per share, diluted (EPS-D)
Consolidated profit for the year, excluding non-controlling interests, divided by
the average number of shares, fully diluted for share options and performance
shares in the money.
Leverage ratio1
Volumes1
Expression used for NIBD/EBITDA.
The Group’s sale of beverages in consolidated entities and sale of the
Group’s products under licence agreements.
Earnings per share, adjusted (EPS-A)
Consolidated profit for the year adjusted for special items after tax1, excluding
non-controlling interests, divided by the average number of shares.
Free cash flow per share (FCFPS)1
Free cash flow4 divided by the average number of shares, fully diluted for
share options and performance shares in the money.
1 This key figure, ratio or elements thereof is not defined or deviates from the definitions of the Danish Finance Society.
2 The calculation of invested capital is specified in section 2.1.
3 The calculation of net-interest bearing debt is specified in section 4.2.
4 The calculation of free cash flow is specified in the statement of cash flows.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
117
SECTION 9.3
CHANGES IN
ACCOUNTING
POLICIES
9.3.1 CHANGED ACCOUNTING POLICIES
AND CLASSIFICATION IN THE ANNUAL
REPORT 2019
The Annual Report has been prepared using the
same accounting policies for recognition and
measurement as those applied to the
consolidated financial statements for 2018,
except for the following new IFRS Standards,
Improvements, Amendments and
Interpretations that were adopted as of 1
January 2019:
• IFRS 16 “Leases”.
• Annual Improvements to IFRS Standards
2015-2017 Cycle.
• Amendments to IFRS 9 “Prepayment
Features with Negative Compensation”.
• Amendments to IAS 19 “Plan Amendment,
Curtailment or Settlement”.
• Amendments to IAS 28 “Long-term Interests
in Associates and Joint Ventures”.
• IFRIC Interpretation 23 “Uncertainty over
Income Tax Treatments”.
IFRS 16 “LEASES”
The implementation of IFRS 16 resulted in
almost all leased assets and liabilities being
recognised in the statement of financial
position, except for short-term leases and
leases of low-value assets. The Group has
applied the simplified transition approach and,
accordingly, not restated the comparative
figures.
The impact on EBITDA was an improvement of
DKK 413m compared with the presentation in
accordance with the previous accounting policy
for leases, where operating leases were
recognised in the income statement on a
straight-line basis. The improvement was the
result of accounting for right-of-use assets as
assets that are depreciated with a
corresponding financing liability reflecting the
future lease payments for the assets.
In the statement of cash flows, lease payments
are presented outside EBITDA as interest paid
and reduction of the lease liability. Before the
implementation of IFRS 16, lease payments
were presented as operating expenses and
therefore a reduction in EBITDA.
At implementation, the Group recognised lease
liabilities and right-of-use assets at the same
amount as leases previously classified as
2019
413
-402
11
-11
-
-
-
2019
413
-11
402
12
-414
-
operating leases. The table provides a
reconciliation between reported operating
leases at 31 December 2018 in the Annual
Report 2018 and the recognised lease liabilities
as of 1 January 2019.
The impact of the changed accounting policies
is specified in the tables below.
Impact on statement of financial position
Impact on income statement
DKK million
Operating profit before depreciation,
amortisation and impairment losses
Depreciation, right-of-use assets
Operating profit before special items
Interest expenses, lease liabilities
Profit before tax
Income tax
Consolidated profit
DKK million
1 Jan. 2019
31 Dec. 2019
Impact on statement of cash flows
1,005
1,013
DKK million
Operating profit before depreciation,
amortisation and impairment losses
23
26
Interest etc. paid
Cash flow from operating activities
469
Cash flow from investing activities
Cash flow from financing activities
Net change in cash flows
Property, plant and
equipment
Land and buildings
Plant and machinery
Other equipment,
fixtures and fittings
Total property, plant
and equipment
Other receivables
Total assets
Equity
Equity, shareholders in
Carlsberg A/S
Total equity
Liabilities
Finance lease liabilities
Lease liabilities
Total liabilities
Total equity and
liabilities
564
1,592
95
1,687
-
-
-
1,687
1,687
1,508
81
1,589
-
-
-
1,589
1,589
PRESENTATION OF REVENUE
For clarity, the line item previously named “Net
revenue” has been changed to “Revenue”.
Likewise, “Gross revenue” has been changed to
“Revenue including excise duties”, and the
specification has been moved from the income
statement to section 1.1. The changed
presentation had no impact on the recognition
and measurement of revenue in 2019 and
2018.
Reconciliation of changes in accounting policy
DKK million
Operating lease commitments disclosed at 31 December 2018
Discounted using the incremental borrowing interest rate of 0.75%
Adjustments as a result of a different treatment, including extension and termination options and
variable payments
Lease liability recognised at 1 January 2019
1,021
-28
599
Changes in net
interest-bearing debt
Lease liabilities
Other receivables
1,592
Lease liabilities, net
1,687
1,589
1,687
-95
1,592
1,589
-81
1,508
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
118
SECTION 9.3 (CONTINUED)
CHANGES IN
ACCOUNTING
POLICIES
OTHER CHANGES
Apart from the implementation of IFRS 16, the
implemented Standards, Improvements,
Amendments and Interpretations had no
impact on the Group’s accounting policies, as
they cover areas that are not material and/or
relevant for the Group or do not change the
accounting policies applied in 2019.
NEW AND AMENDED IFRS STANDARDS
AND INTERPRETATIONS NOT YET
ADOPTED BY THE EU
The following new or amended IFRS Standards
and Interpretations of relevance to the Group
have been issued but not yet adopted by
the EU:
• IFRS 17 “Insurance Contracts”, effective
for financial years beginning on or after
1 January 2021.
The new Standard is not mandatory for the
financial reporting for 2019. The Group expects
to adopt the new Standard when it becomes
mandatory.
SECTION 9.4
NEW LEGISLATION
NEW AND AMENDED IFRS STANDARDS
The following new or amended IFRS Standards
and Interpretations of relevance to the Group
became effective as of 1 January 2020:
• Amendments to IAS 1 and IAS 8 “Definition of
Material”.
• Amendments to IFRS 3 “Business
Combinations”.
• Amendments to “References to the
Conceptual Framework in IFRS Standards”.
• Interest rate benchmark reform (Amendments
to IFRS 9, IAS 39 and IFRS 7).
The amendment to IFRS 3 is expected to be
adopted by the EU in early 2020. The Group
will adopt the amendment when it becomes
mandatory.
IMPACT FROM CHANGES IN ACCOUNTING
POLICIES FOR 2020
The implemented Standards, Improvements,
Amendments and Interpretations listed above
are not expected to have any significant impact
on the financials or the Group’s accounting
policies, as they cover areas that are not
material and/or relevant for the Group or do
not change the accounting policies applied
in 2019.
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
119
Consolidated financial statements
SECTION 10
GROUP
COMPANIES
This section lists the subsidiaries, associates and joint ventures in the Group. Parent direct
ownership shows the legal ownership held by the immediate holding company in the Group.
Cross-holdings held by fully owned companies in the Group are aggregated. Consolidated
ownership shows the share of the result of the entity that is attributed to the shareholders of
Carlsberg A/S in the consolidated financial statements.
Carlsberg Breweries A/S
Western Europe
Carlsberg Danmark A/S
Carlsberg Supply Company Danmark A/S
Carlsberg Sweden Holding 2 AB
Carlsberg Sverige AB
Carlsberg Supply Company Sverige AB
Ringnes Norge AS
Ringnes AS
Ringnes Brygghus AS
Ringnes Supply Company AS
Ringnes Farris Eiendom AS
Ringnes Imsdal Eiendom AS
Ringnes Administrasjon Eiendom AS
Ringnes Gjelleråsen Eiendom AS
Solo AS
Oy Sinebrychoff Ab
Sinebrychoff Supply Company Oy
Carlsberg Deutschland Holding GmbH
Holzmarkt Brewing Company GmbH
Tuborg Deutschland GmbH
Market
Note
Denmark
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
3
100%
100%
Western Europe
Market
Note
Denmark
Denmark
Sweden
Sweden
Sweden
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Finland
Finland
Germany
Germany
Germany
1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
91%
100%
100%
100%
100%
100%
Carlsberg Deutschland GmbH
Duckstein GmbH
Holzmarkt Beteiligungsgesellschaft mbH
Holsten-Brauerei AG
Germany
Germany
Germany
Germany
Carlsberg Supply Company Deutschland GmbH Germany
Carlsberg Deutschland Logistik GmbH
Germany
Carlsberg Supply Company Polska SA
Carlsberg Polska Sp. z o.o.
Saku Ölletehase AS
Aldaris JSC
Svyturys-Utenos Alus UAB
Carlsberg UK Holdings Limited
Carlsberg UK Limited
Carlsberg Supply Company UK Limited
LF Brewery Holdings Limited
Emeraude S.A.S.
Kronenbourg S.A.S.
Kronenbourg Supply Company S.A.S.
Kronenbourg Breweries Canada Inc.
Fondation Kronenbourg
S.A.S. Onyx
Poland
Poland
Estonia
Latvia
Lithuania
UK
UK
UK
UK
France
France
France
Canada
France
France
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
91%
100%
100%
100%
100%
100%
Number of
subsidiaries
5
1
3
4
8
Parent
direct
ownership
Consolidated
ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Consolidated financial statements
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
120
Western Europe
Market
Note
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
Asia
Market
Note
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
Feldschlösschen Getränke Holding AG
Feldschlösschen Getränke AG
Schlossgarten Gastronomie AG
SB Swiss Beverage AG
Feldschlösschen Supply Company AG
Carlsberg Supply Company AG
Sicera AG
Acrospires GmbH
Nya Carnegiebryggeriet AB
E.C. Dahls Bryggeri AS
HK Yau Limited
UAB "Svyturys Brewery"
London Fields Brewery Opco Ltd
Carlsberg Italia S.p.A.
Carlsberg Horeca Srl
T&C Italia Srl
Olympic Brewery SA
Hellenic Beverage Company SA
Carlsberg Serbia Ltd
Carlsberg BH d.o.o.
Carlsberg Montenegro d.o.o.
Carlsberg Croatia d.o.o.
Carlsberg Bulgaria AD
B to B Distribution EOOD
Carlsberg Hungary Kft.
Grimbergen Abbey Brewery
Zatecky Pivovar spol. S.r.o.
CTDD Beer Imports Ltd
Carlsberg Canada Inc.
Carlsberg USA Inc.
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Sweden
Norway
Hong Kong
Lithuania
UK
Italy
Italy
Italy
Greece
Greece
Serbia
Bosnia and
Herzegovina
Montenegro
Croatia
Bulgaria
Bulgaria
Hungary
Belgium
Czechia
Canada
Canada
USA
1
1
100%
100%
100%
100%
100%
100%
100%
100%
98%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
98%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Carlsberg Supply Company Asia Ltd
Carlsberg Brewery Hong Kong Ltd
Guangzhou Carlsberg Consultancy and
Management Services Co Ltd
Hong Kong
Hong Kong
China
Kunming Huashi Brewery Company Limited China
Carlsberg (China) Breweries and Trading
Company Limited
Carlsberg Brewery (Guangdong) Ltd
Carlsberg Beer Enterprise Management
(Chongqing) Company Limited
Carlsberg Brewery (Anhui) Company
Ltd
Carlsberg Tianmuhu Brewery (Jiangsu)
Company Ltd
Carlsberg Procurement (Shenzhen)
Company Ltd
Xinjiang Wusu Breweries Co., Ltd
Ningxia Xixia Jianiang Brewery Limited
Chongqing Brewery Co., Ltd
Chongqing Jianiang Brewery Ltd
Carlsberg Brewery Malaysia Berhad
Carlsberg Marketing Sdn BHD
Euro Distributors Sdn BHD
Carlsberg Singapore Pte Ltd
Maybev Pte Ltd
Carlsberg South Asia Pte Ltd
South Asian Breweries Pte. Ltd
Carlsberg India Pvt. Ltd
Gorkha Brewery Pvt. Ltd
G.B. Marketing Pvt Ltd
Carlsberg Vietnam Trading Co. Ltd
China
China
China
China
China
China
China
China
China
China
Malaysia
Malaysia
Malaysia
Singapore
Singapore
Singapore
Singapore
India
Nepal
Nepal
Vietnam
A
B
A
C
D
D
D
D, E
D, E
100%
100%
100%
100%
100%
99%
100%
75%
100%
100%
100%
70%
60%
51%
51%
100%
100%
100%
51%
67%
100%
100%
90%
90%
100%
4
5
100%
100%
100%
100%
100%
99%
100%
75%
100%
100%
100%
70%
60%
79%
51%
51%
51%
51%
26%
100%
100%
100%
90%
90%
100%
A Listed company.
B Chongqing Jianiang Brewery Ltd is owned by Chongqing Brewery Co., Ltd (51%) and Carlsberg Brewery Hong
Kong Ltd (49%), resulting in a consolidated ownership of 79%.
C Maybev Pte Ltd is owned by Carlsberg Singapore Pte Ltd (51%), which is owned by Carlsberg Brewery Malaysia
Berhad (51%), resulting in a consolidated ownership of 26%.
D The Group owns 67% of Carlsberg South Asia Pte Ltd, which is the holding company of South Asian Breweries Pte.
Ltd, Carlsberg India Pvt. Ltd and Gorkha Brewery Pvt. Ltd (Nepal). The consolidation percentage of Carlsberg South
Asia Pte Ltd is 100% due to a written put option.
E Company not audited by PwC
CARLSBERG GROUP ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS
121
Asia
Carlsberg Vietnam Breweries Ltd
Lao Brewery Co. Ltd
Paduak Holding Pte. Ltd
Caretech Limited
Cambrew Limited
Cambrew Properties Ltd
Angkor Beverage Co Ltd
CB Distribution Co., Ltd
Carlsberg Asia Pte Ltd
KS Holding 1 Pte Ltd
Eastern Europe
Hoppy Union LLC
Baltika Breweries LLC
Carlsberg Azerbaijan LLC
Baku Piva JSC
PJSC Carlsberg Ukraine
OJSC Brewery Alivaria
Carlsberg Kazakhstan Ltd
Baltic Beverages Invest AB
Baltic Beverages Holding AB
Note
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
Non-beverage
1
2
100%
61%
100%
100%
100%
99%
100%
100%
100%
100%
100%
61%
100%
100%
100%
99%
100%
100%
100%
100%
Ejendomsaktieselskabet Tuborg Nord C
Carlsberg Ejendomme Holding A/S
Boliginteressentskabet Tuborg
H A separate annual report is not prepared.
Market
Note
Denmark
Denmark
Denmark
H
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
100%
100%
100%
100%
100%
100%
Associates and joint ventures
Market
Note
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
Denmark
E
87
Market
Vietnam
Laos
Singapore
Hong Kong
Cambodia
Cambodia
Cambodia
Thailand
Singapore
Singapore
Carlsberg Byen P/S
Monster the Cat GmbH
Shangri-la Beverages AG
Sinergie Proattive Srl
Viacer S.G.P.S., Lda
Super Bock Group, S.G.P.S., S.A.
Market
Note
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
F
G
Russia
Russia
Azerbaijan
Azerbaijan
Ukraine
Belarus
Kazakhstan
Sweden
Sweden
100%
100%
100%
91%
100%
78%
100%
100%
100%
3
2
1
1
100%
100%
100%
91%
100%
89%
100%
100%
100%
Serviced Dispense Equipment (Holdings) Limited
UK
Nuuk Imeq A/S
Chongqing Jiawei Beer Co. Ltd
Tibet Lhasa Brewery Company Limited
Lanzhou Huanghe Jianiang Brewery Company
Limited
Greenland
China
China
China
Qinghai Huanghe Jianiang Brewery Company Ltd China
Jiuquan West Brewery Company Limited
China
Tianshui Huanghe Jianiang Brewery Company Ltd China
Switzerland
Switzerland
Italy
Portugal
Portugal
I
I
E
F Baltika Breweries is owned by Carlsberg Sverige AB.
G Consolidation percentage is higher than the ownership share due to written put options.
Not allocated
Carlsberg Finans A/S
Carlsberg International A/S
Visit Carlsberg A/S
Carlsberg Invest A/S
Carlsberg Global Business Services A/S
Carlsberg Insurance A/S
Carlsberg Central Office A/S
Carlsberg Shared Services Sp. z o.o.
Market
Note
Number of
subsidiaries
Parent
direct
ownership
Consolidated
ownership
Denmark
Denmark
Denmark
Denmark
Denmark
Denmark
Denmark
Poland
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Capital Brewing Company Ltd
Lion Brewery (Ceylon) PLC
Hanoi Beer Alcohol and Beverage Joint Stock
Corporation
Carlsberg Distributors Taiwan Limited
NCC Crowns Private Limited
Bottlers Nepal Limited
Myanmar Carlsberg Co. Ltd
Hong Kong
Sri Lanka
Vietnam
A, E, J
E
Taiwan
India
Nepal
Myanmar
E
I Viacer S.G.P.S (Viacer) is the controlling shareholder of Super Bock Group, S.G.P.S. (Super Bock) with a 56%
shareholding, with Carlsberg Breweries A/S owning the remaining 44%. In addition, Carlsberg Breweries A/S has a
direct ownership in Viacer of 29% without exercising control. Therefore, both Viacer and Super Bock are considered
associates of the Group. The Group's direct and indirect ownership of Super Bock totals 60%.
J Lion Brewery (Ceylon) PLC is owned by Carlsberg Brewery Malaysia Berhad (25%). Carlsberg owns 51% of Carlsberg
Brewery Malaysia Berhad, resulting in 13% of the result being attributed to the shareholders in Carlsberg A/S.
25%
65%
35%
50%
29%
56%
33%
32%
33%
50%
50%
50%
50%
50%
49%
25%
17%
50%
33%
22%
51%
25%
65%
35%
50%
29%
60%
33%
32%
26%
50%
50%
50%
50%
50%
49%
13%
17%
50%
33%
20%
51%
16
2
4
1
1
1
Parent Company financial statement
PARENT COMPANY FINANCIAL STATEMENTS
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
122
PARENT COMPANY FINANCIAL
STATEMENTS
Income statement ................................ 123
Statement of comprehensive
income ...................................................... 123
Statement of financial position ...... 124
Statement of changes in equity ..... 125
Statement of cash flows ................... 125
Notes ......................................................... 126
SECTION 1
SUBSIDIARIES AND RELATED PARTIES
1.1 Investments in subsidiaries .................. 126
1.2 Related parties ........................................ 126
SECTION 2
CAPITAL STRUCTURE
2.1 Financial Items ........................................ 127
2.2 Net interest-bearing debt .................... 127
2.3 Share capital ............................................ 128
SECTION 3
STAFF COSTS AND REMUNERATION
3.1 Staff costs and remuneration ............. 129
3.2 Retirement benefit obligations ........... 129
SECTION 4
OTHER DISCLOSURE REQUIREMENTS
4.1 Other operating activities, net ............ 130
4.2 Provisions .................................................. 130
4.3 Asset base and leases ........................... 130
4.4 Fees to auditors ...................................... 130
4.5 Tax .............................................................. 131
4.6 Contingent liabilities and other
commitments ........................................... 132
4.7 Events after the reporting period ...... 132
SECTION 5
GENERAL ACCOUNTING POLICIES
5
General accounting policies ................ 132
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
123
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
DKK million
Administrative expenses
Other operating activities, net
Operating profit before special items
Special items
Financial income
Financial expenses
Profit before tax
Income tax
Profit for the year
Attributable to
Dividend to shareholders
Reserves
Profit for the year
Section
4.1
2.1
2.1
4.5
2019
-73
-29
-102
-3
2,748
-11
2,632
23
2,655
3,204
-549
2,655
2018
DKK million
-64
-56
-120
-
Profit for the year
Other comprehensive income
Retirement benefit obligations
2,448
Income tax
Items that will not be reclassified to the income statement
Other comprehensive income
Total comprehensive income
-12
2,316
29
2,345
2,746
-401
2,345
Section
2019
2,655
2018
2,345
3.2
4.5
-2
-
-2
-2
-3
1
-2
-2
2,653
2,343
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
124
STATEMENT OF FINANCIAL POSITION
DKK million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Receivables
Tax assets
Total non-current assets
Current assets
Receivables
Tax receivables
Other receivables
Total current assets
Total assets
Section 31 Dec. 2019
31 Dec. 2018
DKK million
Section 31 Dec. 2019
31 Dec. 2018
4.3
4.3
1.1
4.5
1.2
1.2
EQUITY AND LIABILITIES
Equity
5
218
6
Share capital
205
Retained earnings
40,353
45,238
Total equity
322
111
514
117
Non-current liabilities
41,009
46,080
Retirement benefit obligations and similar obligations
Provisions
Total non-current liabilities
86
6
1,205
1,297
192
7
647
846
Current liabilities
Borrowings
Trade payables
42,306
46,926
Provisions
Other liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
2.3
3.2
4.2
1.2
4.2
3,051
37,974
41,025
3,051
41,937
44,988
33
48
81
1,033
52
34
81
1,200
1,281
34
50
84
1,647
113
35
59
1,854
1,938
42,306
46,926
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
125
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
DKK million
2019
Equity at 1 January
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Share-based payments
Share-based payments to employees in subsidiaries
Share buy-back
Dividends paid to shareholders
Total changes in equity
Equity at 31 December
2018
Equity at 1 January
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Acquisition/disposal of treasury shares
Settlement of share-based payments
Share-based payments
Share-based payments to employees in subsidiaries
Dividends paid to shareholders
Total changes in equity
Equity at 31 December
Section
Shareholders in Carlsberg A/S
DKK million
Share capital
3,051
-
-
-
-
-
-
-
Retained
earnings
41,937
2,655
-2
2,653
13
209
-4,100
-2,738
-3,963
3,051
37,974
Operating profit before special items
Total equity
Depreciation and amortisation
44,988
2,655
Operating profit before depreciation and amortisation
Other non-cash items
-2
Change in working capital¹
2,653
Interest etc. received
13
Interest etc. paid
209
Income tax paid
-4,100
-2,738
-3,963
41,025
Cash flow from operating activities
Acquisition of property, plant and equipment and intangible assets
Disposal of property, plant and equipment and intangible assets
Total operational investments
Acquisition and disposal of subsidiaries
Dividends from subsidiaries and joint ventures
3,051
-
-
-
-
-
-
-
-
-
41,908
2,345
-2
44,959
2,345
-2
2,343
2,343
44
-94
14
161
-2,439
29
44
-94
14
161
-2,439
29
3,051
41,937
44,988
Capital reductions in subsidiaries
Total financial investments
Other investments in real estate
Total other activities²
Cash flow from investing activities
Free cash flow
Shareholders in Carlsberg A/S
External financing
Cash flow from financing activities
Net cash flow
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
3.1
2.3
2.3
2.3
2.3
3.1
2.3
Section
4.3
1.2
1.2
2.3
2.2
2019
-102
8
-94
18
29
3
-11
31
-24
-17
2
-15
9
2,746
4,500
7,255
-4
-4
7,236
7,212
-6,838
-374
-7,212
-
-
-
2018
-120
10
-110
8
17
6
-11
45
-45
-11
5
-6
-
2,441
-
2,441
-10
-10
2,425
2,380
-2,489
109
-2,380
-
-
-
1 Change in working capital consists of other receivables of DKK -5m (2018: DKK 7m), trade payables and other
liabilities of DKK 40m (2018: DKK 33m) and retirement benefit obligations and other provisions of DKK -6m (2018:
DKK -23m).
2 Other activities cover real estate activities.
SECTION 1
SUBSIDIARIES AND
RELATED PARTIES
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
126
SECTION 1.1
INVESTMENTS IN
SUBSIDIARIES
The carrying amount includes goodwill of DKK
11,206m (2018: DKK 11,206m) on acquisition
of subsidiaries.
Share-based payments to employees in
subsidiaries comprise exercised as well as
outstanding share-based incentive instruments.
Investments in subsidiaries
DKK million
2019
2018
Cost
Cost at 1 January
45,238
45,340
Disposals
Capital reduction
Capital injection
Share-based payments
to employees, net
-13
-4,500
-
-
-
261
-372
-363
Cost at 31 December
40,353
45,238
Carrying amount at 31
December
40,353
45,238
Please see section 10 in the consolidated financial
statements for a list of companies in the Carlsberg Group.
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Indications of impairment of investments in
subsidiaries are assessed annually by management.
Impairment tests are conducted in the same way as
for goodwill in the Group, cf. section 2.2 in the
consolidated financial statements.
It is management’s assessment that no indications of
impairment existed at year-end 2019. Impairment
tests have therefore not been carried out for
subsidiaries.
ACCOUNTING
POLICIES
Dividends on investments in subsidiaries are
recognised in the income statement of the Parent
Company in the financial year in which the dividend is
declared.
Investments in subsidiaries are measured at the lower
of cost and recoverable amount.
Share-based payments granted to employees of the
Company’s subsidiaries and the recharge of losses to
the subsidiaries in connection with the employees’
exercise of share-based awards are recognised as
contributions to and reductions of the investment in
the subsidiaries respectively.
SECTION 1.2
RELATED PARTIES
The Carlsberg Foundation, H.C. Andersens
Boulevard 35, 1553 Copenhagen V, Denmark,
exercises control over Carlsberg A/S. The
Foundation holds 29.4% of the shares and
75.1% of the voting power in Carlsberg A/S,
excluding treasury shares.
The following transactions took place between
the Carlsberg Foundation and the Carlsberg
Group in 2019:
• The Carlsberg Foundation received a dividend
from Carlsberg A/S and participated pro rata
in the Carlsberg A/S share buy-back.
• Carlsberg A/S received statutory funding and
grants for research and development.
• Carlsberg A/S leased parking spaces from the
Carlsberg Foundation.
• The Carlsberg Foundation supports the
rebuilding of the Carlsberg Visitor Center and
Museum.
• Carlsberg Breweries leases storage facilities in
the researcher apartments.
• Carlsberg A/S held the Annual General
Meeting and an employee gathering at Ny
Carlsberg Glyptotek and provided the Ny
Carlsberg Glyptotek with products at a
discount or free of charge as part of the
sponsorship of certain events.
• The Tuborg Foundation sponsored seven
seats for Carlsberg employees at an
UNLEASH event.
• Carlsberg and the foundations each
contributed to the construction of the event
infrastructure of Folkemødet, the People’s
Democratic Festival.
These transactions are described in further
detail in section 8.3 of the consolidated
financial statements.
It is estimated that the benefit for the Carlsberg
Group corresponds to the value of the services
provided to the Carlsberg Foundation, which in
turn corresponds to what each party would
have had to pay to have the same deliverables
provided by external parties.
OTHER RELATED PARTIES
Related parties also comprise Carlsberg A/S’
Supervisory Board and Executive Board, their
close family members and companies in which
these persons have significant influence. During
the year, there were no transactions between
these parties and the Group, except for
remuneration as disclosed in section 3.
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
127
SECTION 2
CAPITAL
STRUCTURE
SECTION 1.2 (CONTINUED)
RELATED PARTIES
SECTION 2.1
FINANCIAL ITEMS
No losses on loans to or receivables from
subsidiaries or joint ventures were recognised or
provided for in either 2019 or 2018.
Interest income relates to interest from cash
and cash equivalents and loans to subsidiaries,
whereas interest expenses relate to interest on
borrowings.
Transactions with subsidiaries
SECTION 2.2
NET INTEREST-
BEARING DEBT
DKK million
Other operating
activities, net
Interest income
Interest expenses
Dividends received
Capital reduction
Capital injection
Loans
Receivables
Borrowings
Trade payables
Other payables
2019
2018
Financial items recognised in the income
statement
Net interest-bearing debt
31
2
-14
2,746
-4,500
-
319
84
25
6
-8
2,441
-
261
560
144
-1,033
-1,647
-7
-6
-9
-
DKK million
2019
2018
DKK million
Financial income
Interest income
Dividends from
subsidiaries
Total
Financial expenses
Interest expenses
Other
Total
Current borrowings
Gross interest-bearing debt
2
7
Receivables
2,746
2,748
2,441
2,448
Loans to subsidiaries
Net interest-bearing debt
Changes in net interest-bearing debt
Net interest-bearing debt at 1 January
-14
3
-11
-8
-4
Cash flow from operating activities, excluding interest-bearing part
Cash flow from investing activities
-12
Share buy-back
The fair value of receivables and borrowings in
subsidiaries corresponds to the carrying
amount in all material respects.
Financial items, net
2,737
2,436
Dividends to shareholders
Acquisition/disposal of treasury shares and settlement of share-based payments
No financial items were recognised in other
comprehensive income.
Total change
Net interest-bearing debt at 31 December
2019
1,033
1,033
-3
-319
711
1,085
24
-7,236
4,100
2,738
-
-374
711
2018
1,647
1,647
-2
-560
1,085
976
45
-2,425
-
2,439
50
109
1,085
The average effective interest rate on loans to
subsidiaries was 0.6% (2018: 0.6%) and on
loans from subsidiaries 0.5% (2018: 0.5%).
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
128
Transactions with shareholders in Carlsberg
A/S
2019
2018
Dividends to shareholders
-2,738
-2,439
Acquisition of treasury
shares
Disposal of treasury shares
Total
-4,100
-
-128
78
-6,838
-2,489
In the 2019 financial year, the Company
acquired class B treasury shares of a nominal
amount of DKK 90m (2018: DKK 4m) at an
average price of DKK 907 (2018: DKK 740).
Class B treasury shares are acquired and
disposed of as part of the share buy-back
programme and to facilitate settlement of the
share-based incentive programmes. The
Company holds no class A shares.
At 31 December 2019, the fair value of
treasury shares amounted to DKK 4,532m
(2018: DKK 69m). The holdings of treasury
shares are specified in section 4.3 in the
consolidated financial statements.
SECTION 2.3
SHARE CAPITAL
DIVIDENDS
The proposed dividend of DKK 21.00 per share
(2018: DKK 18.00 per share), amounting to
DKK 3,204m (2018: DKK 2,746m). The
proposed dividend has been included in
retained earnings at 31 December 2019.
Dividends to be paid out in 2020 for 2019, net
of dividends on treasury shares held at 31
December 2019, will amount to DKK 3,108m.
Dividends paid out in 2019 for 2018, net of
dividends on treasury shares, amounted to
DKK 2,738m (paid out in 2018 for 2017: DKK
2,439m). Dividends paid out to shareholders in
Carlsberg A/S do not impact taxable income in
Carlsberg A/S.
SHARE BUY-BACK AND TREASURY SHARES
On 6 February 2019, the Company initiated a
12-month DKK 4.5bn share buy-back
programme. At 31 December 2019, 4,518,999
B shares had been repurchased at a total
purchase price of DKK 4.1bn as part of this
programme.
According to the authorisation of the Annual
General Meeting, the Supervisory Board may,
in the period until 13 March 2023, allow the
Company to acquire treasury shares up to a
total holding of 10% of the nominal share
capital at a price quoted on Nasdaq
Copenhagen at the time of acquisition with a
deviation of up to 10%. The permitted holding
of treasury shares covers those acquired in
share buy-back programmes. The Company
holds no class A shares.
Share capital
Class A shares
Class B shares
Total share capital
Shares of
DKK 20
Nominal
value,
DKK ’000
Shares of
DKK 20
Nominal
value,
DKK ’000
Shares of
DKK 20
Nominal
value,
DKK ’000
1 January 2018
33,699,252
673,985
118,857,554
2,377,151
152,556,806
3,051,136
No change in 2018
-
-
-
-
-
-
31 December 2018
33,699,252
673,985
118,857,554
2,377,151
152,556,806
3,051,136
No change in 2019
-
-
-
-
-
-
31 December 2019
33,699,252
673,985
118,857,554
2,377,151
152,556,806
3,051,136
A shares carry 20 votes per DKK 20 share. B shares carry two votes per DKK 20 share. A preferential right to an 8%
non-cumulative dividend is attached to B shares. Apart from votes and dividends, all shares rank equally.
SECTION 3
STAFF COSTS AND
REMUNERATION
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
129
SECTION 3.1
STAFF COSTS AND
REMUNERATION
The remuneration of the Supervisory Board,
the executive directors and key management
personnel is described in detail in the
Remuneration report in the Management
review.
In 2019, the Supervisory Board received total
remuneration of DKK 9.59m (2018: DKK
9.35m), comprising fixed salary only.
Staff costs and remuneration
DKK million
Salaries and other remuneration
Retirement benefit costs - defined contribution plans
Share-based payments
Total
SHARE-BASED INCENTIVE PROGRAMMES
The executive directors in the Parent Company
are the same as for the Carlsberg Group.
Please refer to section 7.3 in the consolidated
financial statements for share-based incentive
programmes for the executive directors.
PERFORMANCE SHARES
Besides the executive directors, one employee
in the Parent Company participates in the
Group’s performance share programmes as
described in section 7.3 in the consolidated
financial statements. Refunds etc. between
Carlsberg A/S and its subsidiaries are
recognised directly in equity.
ACCOUNTING
POLICIES
Staff costs are recognised in the financial year in
which the employee renders the related service. The
fair value of share-based incentives, which is
expensed over the vesting period of the programme
according to the service conditions, is recognised in
staff costs and offset directly against equity.
The fair value of share-based incentives granted to
employees in subsidiaries is recognised as
investments in subsidiaries and offset directly against
equity.
SECTION 3.2
RETIREMENT
BENEFIT
OBLIGATIONS
Retirement benefit obligations and similar
obligations comprise payments to retired
directors that are not covered by an insurance
company. The plan is unfunded.
The difference between the purchase price and the
selling price for the exercise of share-based incentives
is settled between Carlsberg A/S and the individual
subsidiary and offset directly against investments in
subsidiaries.
Total obligations amounted to DKK 33m
(2018: DKK 34m) and include actuarial losses
of DKK 2m (2018: DKK 3m) and benefits paid
in the year of DKK 3m (2018: DKK 3m).
The difference between the fair value of the Parent
Company’s equity instruments and the exercise price
of outstanding share-based incentives is recognised
as a receivable and offset directly against investments
in subsidiaries.
Share-based incentives granted to the Parent
Company’s own employees are recognised and
measured in accordance with the accounting policies
used by the Group.
2019
112
5
38
155
42
63
105
50
155
2018
104
5
40
149
43
54
97
52
149
Of the expected payment obligation, DKK 3m
is due within one year and DKK 15m after
more than five years from the reporting date.
The underlying actuarial assumptions are
based on local economic and labour market
conditions. The discount rate was 0.5% (2018:
0.5%). The rate of increase in future retirement
benefit obligations was 1% (2018: 1%).
During the year, DKK 0m (2018: DKK 0m) was
recognised in the income statement and DKK -
2m (2018: DKK -3m) in other comprehensive
income.
Staff costs are included in the following items in the income statement
Administrative expenses
Other operating activities, net
Total staff costs recognised by the Parent Company
Staff costs recognised by other Group companies
Total
The Company had an average of 97 (2018: 80) full-time employees during the year.
SECTION 4
OTHER DISCLOSURE
REQUIREMENTS
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
130
SECTION 4.1
OTHER OPERATING
ACTIVITIES, NET
Other operating activities are secondary to the
principal activities of the Group and include
income and expenses relating to rental
properties, research activities, and gains and
losses on the disposal of intangible assets and
property, plant and equipment.
In 2019, real estate, net, amounted to DKK
-1m (2018: DKK -21m), driven by a property
tax refund.
Other operating activities, net
DKK million
2019
2018
Gains on disposal of real
estate
Real estate, net
Research activities,
including the Carlsberg
Research Laboratory, net
Other, net
Total
1
-1
-27
-2
-29
5
-21
-40
-
-56
Research expenses are partially financed
through funding received from the Carlsberg
Foundation for the operation of the Carlsberg
Research Laboratory and other grants.
ACCOUNTING
POLICIES
The funding and grants are recognised in the income
statement in the same period as the activities to
which they relate.
SECTION 4.2
PROVISIONS
SECTION 4.3
ASSET BASE AND
LEASES
The carrying amount of intangible assets was
DKK 5m (2018: DKK 6m), and the carrying
amount of property, plant and equipment was
DKK 218m (2018: DKK 205m). Property, plant
and equipment comprised land and buildings of
DKK 182m (2018: DKK 176m) and plant and
machinery of DKK 36m (2018: DKK 29m).
SECTION 4.4
FEES TO AUDITORS
Fees to auditors appointed by the Annual
General Meeting
DKK million
Statutory audit
Assurance engagements
Tax advisory
Other services
Total
2019
0.3
-
-
-
0.3
2018
0.3
-
-
-
0.3
Provisions primarily comprise warranty
provisions regarding real estate disposed of
and provisions for ongoing disputes and
lawsuits etc.
Depreciation and amortisation of DKK 8m
(2018: DKK 10m) were included in
administrative expenses.
Carlsberg A/S has no lease contracts to be
recognised. The lease expenses recognised in
the income statement related to short-term
leases and leases of low-value assets and
amounted to DKK 8m. Such contracts comprise
the lease of copy and printing machines, coffee
machines, small IT devices and similar
equipment.
At 31 December 2019, provisions amounted to
DKK 82m (2018: DKK 85m). Provisions
amounting to DKK 5m (2018: DKK 20m) were
utilised during the year. No provisions were
reversed in 2019 or 2018.
Of total provisions, DKK 34m (2018: DKK
35m) fall due within one year and the
remaining DKK 48m (2018: DKK 50m)
between one and five years. As in previous
years, no provisions fell due after more than
five years from the end of the reporting period.
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
131
Reconciliation of tax for the year
ACCOUNTING
POLICIES
SECTION 4.5
TAX
Deferred tax assets amounted to DKK 111m
(2018: DKK 117m) and primarily comprised
tax on property, plant and equipment of DKK
39m (2018: DKK 41m), provisions and
retirement benefit obligations of DKK 19m
(2018: DKK 20m), and tax losses etc. of DKK
68m (2018: DKK 69m).
The utilisation of tax loss carryforwards
depends on future positive taxable income
exceeding the realised deferred tax liabilities.
Deferred tax liabilities amounted to DKK 15m
(2018: DKK 13m).
The net change in deferred tax assets of DKK
6m comprised tax recognised in total
comprehensive income of DKK 23m (2018:
DKK 29m) and a joint taxation contribution of
DKK -29m (2018: DKK -39m).
Together with changes to tax for prior years,
the total tax for the year recognised in the
income statement comprised income of
DKK 23m (2018: DKK 29m). Of the deferred
tax assets, DKK 6m (2018: DKK 5m) is
expected to be used within one year. All tax
assets have been recognised.
DKK million
Calculated tax on profit
Adjustments to tax for prior
years
Non-deductible expenses
Tax-free dividend and tax-
exempted items
Tax for the year
2019
579
-
3
-605
-23
2018
510
-4
2
-537
-29
ACCOUNTING ESTIMATES
AND JUDGEMENTS
The administration company, Carlsberg A/S,
has unlimited and joint legal responsibility with
the other Danish companies under the joint
taxation scheme for withholding taxes on
dividends, interest and royalties.
Carlsberg A/S recognises deferred tax assets,
including the tax base of tax loss carryforwards if
management assesses that these tax assets can be
offset against positive taxable income in the
foreseeable future. This judgement is made annually
and based on budgets and business plans for the
coming years.
Carlsberg A/S is the administration company and is
subject to the Danish rules on mandatory joint
taxation of the Carlsberg Group’s Danish companies.
Carlsberg A/S accordingly pays all income taxes to
the tax authorities under the joint taxation scheme.
Danish subsidiaries are included in the joint taxation
from the date when they are included in the
consolidated financial statements and up to the date
when they are excluded from the consolidation. The
jointly taxed Danish companies are taxed under the
on-account tax scheme.
On payment of joint taxation contributions, the
current Danish income tax is allocated between the
Danish jointly taxed companies in proportion to their
taxable income. Companies with tax losses receive
joint taxation contributions from other companies
that have used the tax losses to reduce their own
taxable profit (full absorption).
Tax on profit/loss for the year comprises profit/loss
from real estate partnerships (joint ventures), as these
are not individually taxed but included in the taxable
income of the partners. In addition, tax on profit/loss
and deferred tax are calculated and recognised as
described in section 6 in the consolidated financial
statements.
Income tax expenses
DKK million
Tax for the year
Income
statement
Other
comprehensive
income
Total
comprehensive
income
Income
statement
Other
comprehensive
income
Total
comprehensive
income
2019
2018
Change in deferred tax and non-current tax liabilities during the year
Adjustments to current tax for prior years
Adjustments to deferred tax and non-current tax liabilities for prior
years
Total
-23
-
-
-23
-
-
-
-
-23
-
-
-23
-25
-1
-3
-29
-1
-
-
-1
-26
-1
-3
-30
SECTION 5
CARLSBERG GROUP ANNUAL REPORT 2019 PARENT COMPANY FINANCIAL STATEMENT
132
GENERAL
ACCOUNTING POLICIES
SECTION 4.7
EVENTS AFTER THE
REPORTING PERIOD
Apart from the events recognised or disclosed
in the financial statements, no events have
occurred after the reporting date of importance
to the financial statements.
The 2019 financial statements of Carlsberg
A/S have been prepared in accordance with
International Financial Reporting Standards
(IFRS) as adopted by the EU and further
requirements in the Danish Financial
Statements Act.
The financial statements are presented in
Danish kroner (DKK), which is the presentation
currency.
The accounting policies for the Parent
Company are the same as for the Group, cf.
section 9 in the consolidated financial
statements and the individual sections.
SIGNIFICANT ACCOUNTING ESTIMATES
AND JUDGEMENTS
In preparing Carlsberg A/S’ financial
statements, management makes various
accounting estimates and judgements that
form the basis of presentation, recognition and
measurement of the Company’s assets and
liabilities.
The estimates and judgements made are based
on historical experience and other factors that
management assesses to be reliable, but that
by their very nature are associated with
uncertainty and unpredictability. These
estimates and judgements may therefore prove
incomplete or incorrect, and unexpected events
or circumstances may arise.
The significant accounting estimates and
judgements made and accounting policies
specific to the Parent Company are presented
in the explanatory notes.
SECTION 4.6
CONTINGENT
LIABILITIES
AND OTHER
COMMITMENTS
Carlsberg A/S has issued guarantees to
subsidiaries for pension obligations of DKK
337m (2018: DKK 339m).
Carlsberg A/S is jointly registered for Danish
VAT and excise duties with Carlsberg
Breweries, Carlsberg Danmark, Carlsberg
Supply Company Danmark and various other
Danish subsidiaries, and is jointly and severally
liable for payment of VAT and excise duties.
Carlsberg A/S is party to certain lawsuits,
disputes etc. of various scopes. In
management’s opinion, apart from items
recognised in the statement of financial
position or disclosed in the financial
statements, the outcome of these lawsuits,
disputes etc. will not have a material negative
effect on the Company’s financial position.
Carlsberg A/S has issued a guarantee in
respect of rental obligations of DKK 11m
(2018: DKK 32m).
Financial statements
REPORTS
MANAGEMENT
STATEMENT
CARLSBERG GROUP ANNUAL REPORT 2019 FINANCIAL STATEMENTS
133
The Supervisory Board and the Executive
Board have today discussed and approved the
Annual Report of the Carlsberg Group and the
Parent Company for 2019.
The Annual Report has been prepared in
accordance with International Financial
Reporting Standards as adopted by the EU and
further requirements in the Danish Financial
Statements Act.
In our opinion, the consolidated financial
statements and the Parent Company’s financial
statements give a true and fair view of the
Carlsberg Group’s and the Parent Company’s
assets, liabilities and financial position at
31 December 2019 and of the results of the
Carlsberg Group’s and the Parent Company’s
operations and cash flows for the financial
year 2019.
Further, in our opinion the Management review
includes a fair review of the development in the
Carlsberg Group’s and the Parent Company’s
operations and financial matters, of the result
for the year, and of the Carlsberg Group’s and
the Parent Company’s financial position, as
well as describing the significant risks and
uncertainties affecting the Carlsberg Group and
the Parent Company.
We recommend that the Annual General
Meeting approve the Annual Report.
Executive Board of Carlsberg A/S
Cees ’t Hart
President & CEO
Heine Dalsgaard
CFO
Supervisory Board of Carlsberg A/S
Flemming Besenbacher
Chairman
Lars Fruergaard Jørgensen
Deputy Chairman
Copenhagen, 4 February 2020
Hans Andersen
Carl Bache
Magdi Batato
Domitille Doat-Le Bigot
Lilian Fossum Biner
Richard Burrows
Eva Vilstrup Decker
Finn Lok
Erik Lund
Søren-Peter Fuchs Olesen
Peter Petersen
Majken Schultz
Lars Stemmerik
REPORTS
INDEPENDENT
AUDITOR’S REPORT
CARLSBERG GROUP ANNUAL REPORT 2019 FINANCIAL STATEMENTS
134
What we have audited
The Consolidated Financial Statements and
Parent Company Financial Statements of
Carlsberg A/S for the financial year 1 January
to 31 December 2019 comprise income
statement, statement of comprehensive
income, statement of financial position,
statement of changes in equity, statement of
cash flows and notes, including summary of
significant accounting policies for the Group as
well as for the Parent Company. Collectively
referred to as the “Financial Statements”.
TO THE SHAREHOLDERS OF
CARLSBERG A/S
OUR OPINION
In our opinion, the Consolidated Financial
Statements and the Parent Company Financial
Statements (pp 54-132) give a true and fair
view of the Group’s and the Parent Company’s
financial position at 31 December 2019 and of
the results of the Group’s and the Parent
Company’s operations and cash flows for the
financial year 1 January to 31 December 2019
in accordance with International Financial
Reporting Standards as adopted by the EU and
further requirements in the Danish Financial
Statements Act.
Our opinion is consistent with our Auditor’s
Long-form Report to the Audit Committee and
the Supervisory Board.
BASIS FOR OPINION
We conducted our audit in accordance with
International Standards on Auditing (ISAs) and
the additional requirements applicable in
Denmark. Our responsibilities under those
standards and requirements are further
described in the Auditor’s responsibilities for the
audit of the Financial Statements section of our
report.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We are independent of the Group in
accordance with the International Ethics
Standards Board for Accountants’ Code of
Ethics for Professional Accountants (IESBA
Code) and the additional requirements
applicable in Denmark. We have also fulfilled
our other ethical responsibilities in accordance
with the IESBA Code.
To the best of our knowledge and belief,
prohibited non-audit services referred to in
Article 5(1) of Regulation (EU) No 537/2014
were not provided.
Appointment
We were first appointed auditors of Carlsberg
A/S on 30 March 2017 for the financial year
2017. We have been reappointed annually by
shareholder resolution for a total period of
uninterrupted engagement of three years
including the financial year 2019.
KEY AUDIT MATTERS
Key audit matters are those matters that, in
our professional judgement, were of most
significance in our audit of the Financial
Statements for 2019. These matters were
addressed in the context of our audit of the
Financial Statements as a whole, and in
forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter
Revenue recognition
Recognition of revenue is complex
due to the variety of different
revenue streams, ranging from sales
of goods, royalty income and sales
of by-products recognised when all
significant risks and rewards have
been transferred to the customer or
in terms of the licence agreement.
Furthermore, the various discounts
and locally imposed duties and fees
in regard to revenue recognition are
complex and introduce an inherent
risk to the revenue recognition
process.
We focused on this area, as there is
a risk of non-compliance with
accounting policies due to
complexity originating from different
customer behaviours, structures,
market conditions and terms in the
various countries.
Revenue recognition and accounting
treatment are described in section
1.1 “Segmentation of operations –
Accounting estimates and
judgements” in the Consolidated
Financial Statements.
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
Recoverability of the carrying amount of goodwill and brands
CARLSBERG GROUP ANNUAL REPORT 2019 FINANCIAL STATEMENTS
135
Our audit procedures included considering the appropriateness of the revenue
recognition accounting policies and assessing compliance with the accounting
principles.
We tested the relevant controls, including applicable information systems and
Management’s monitoring of controls used to ensure the completeness,
accuracy and timing of revenue recognised.
We discussed the key assumptions related to the recognition and classification
of revenue with Management. Further, we performed substantive procedures
regarding invoicing, significant contracts, significant transactions (including
discounts) and locally imposed duties and fees in order to assess the accounting
treatment and principles applied.
We applied data analysis in our testing of revenue transactions in order to
identify transactions outside the ordinary transaction flow, including journal
entry testing and cut-off testing at year-end.
In addressing the risks, we walked through and tested relevant controls related
to assessing the carrying amount of goodwill and brands.
We considered the appropriateness of Management’s defined cash-generating
units (CGUs) within the business. We evaluated whether there were factors
requiring Management to change their definition. We examined the
methodology used by Management to assess the carrying amount of goodwill
and brands assigned to CGUs, and the process for identifying CGUs that require
impairment testing to determine compliance with IFRS.
We performed detailed testing for the assets where an impairment review was
required or indications of impairment were identified. For those assets, we
analysed the reasonableness of key assumptions in relation to the ongoing
operation of the assets.
We corroborated estimates of future cash flows and challenged whether they
are reasonable and supported by the most recent approved Management
budgets, including expected future performance of the CGUs, and challenged
whether these are appropriate in light of future macroeconomic expectations in
the markets.
We used our internal valuation specialists, evaluated the assumptions used by
Management, including assessment of price and volume forecasts, discount
rates and long-term growth rates, and tested the mathematical accuracy of
the relevant value-in-use models prepared by Management.
Further, we assessed the appropriateness of disclosures, including sensitivity
analyses prepared for the key assumptions.
The principal risks are in relation to
Management’s assessment of the
future timing and amount of cash
flows that are used to project the
recoverability of the carrying
amount of goodwill and brands.
There are specific risks related to
macroeconomic conditions and
volatile earnings caused by volume
decline, intensified competition and
changed regulations in key markets
– conditions that could also result in
Management deciding to change
brand strategy to drive business
performance.
Bearing in mind the generally long-
lived nature of the assets, the most
critical assumptions are
Management’s view of cash-
generating units, prices, volumes,
discount rates, growth rates, royalty
rates, expected useful life and costs,
and future free cash flows.
We focused on this area, as
Management is required to exercise
considerable judgement because of
the inherent complexity in
estimating future cash flows.
The key assumptions and
accounting treatment are described
in section 2.2 “Impairment” in the
Consolidated Financial Statements.
MANAGEMENT’S RESPONSIBILITIES FOR THE
FINANCIAL STATEMENTS
Management is responsible for the preparation
of consolidated financial statements and parent
company financial statements that give a true
and fair view in accordance with International
Financial Reporting Standards as adopted by
the EU and further requirements in the Danish
Financial Statements Act, and for such internal
control as Management determines is
necessary to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or error.
In preparing the Financial Statements,
Management is responsible for assessing the
Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as
applicable, matters related to going concern
and using the going concern basis of
accounting unless Management either intends
to liquidate the Group or the Parent Company
or to cease operations, or has no realistic
alternative but to do so.
STATEMENT ON THE MANAGEMENT REVIEW
Management is responsible for Management
Review (pp 3-53).
Our opinion on the Financial Statements does
not cover Management Review, and we do not
express any form of assurance conclusion
thereon.
In connection with our audit of the Financial
Statements, our responsibility is to read
Management Review and, in doing so, consider
whether Management Review is materially
inconsistent with the Financial Statements or
our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
Moreover, we considered whether
Management Review includes the disclosures
required by the Danish Financial Statements
Act.
Based on the work we have performed, in our
view, Management Review is in accordance
with the Consolidated Financial Statements
and the Parent Company Financial Statements
and has been prepared in accordance with the
requirements of the Danish Financial
Statements Act. We did not identify any
material misstatement in Management Review.
CARLSBERG GROUP ANNUAL REPORT 2019 FINANCIAL STATEMENTS
136
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable
assurance about whether the Financial
Statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs
and the additional requirements applicable in
Denmark will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in the
aggregate, they could reasonably be expected
to influence the economic decisions of users
taken on the basis of these Financial
Statements.
As part of an audit in accordance with ISAs and
the additional requirements applicable in
Denmark, we exercise professional judgement
and maintain professional scepticism
throughout the audit. We also:
• Identify and assess the risks of material
misstatement of the Financial Statements,
whether due to fraud or error, design and
perform audit procedures responsive to those
risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a
material misstatement resulting from fraud is
higher than for one resulting from error, as
fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control
relevant to the audit in order to design audit
procedures that are appropriate in the
circumstances, but not for the purpose of
expressing an opinion on the effectiveness of
the Group’s and the Parent Company’s
internal control.
• Evaluate the appropriateness of accounting
policies used and the reasonableness of
accounting estimates and related disclosures
made by Management.
• Conclude on the appropriateness of
Management’s use of the going concern basis
of accounting and based on the audit
evidence obtained, whether a material
uncertainty exists related to events or
conditions that may cast significant doubt on
the Group’s and the Parent Company’s ability
to continue as a going concern. If we
conclude that a material uncertainty exists,
we are required to draw attention in our
auditor’s report to the related disclosures in
the Financial Statements or, if such
disclosures are inadequate, to modify our
opinion. Our conclusions are based on the
audit evidence obtained up to the date of our
auditor’s report. However, future events or
conditions may cause the Group or the Parent
Company to cease to continue as a going
concern.
• Evaluate the overall presentation, structure
and content of the Financial Statements,
including the disclosures, and whether the
Financial Statements represent the underlying
transactions and events in a manner that
achieves fair presentation.
CARLSBERG GROUP ANNUAL REPORT 2019 FINANCIAL STATEMENTS
137
From the matters communicated with those
charged with governance, we determine those
matters that were of most significance in the
audit of the Financial Statements of the current
period and are therefore the key audit matters.
We describe these matters in our auditor’s
report unless law or regulation precludes public
disclosure about the matter or when, in
extremely rare circumstances, we determine
that a matter should not be communicated in
our report because the adverse consequences
of doing so would reasonably be expected to
outweigh the public interest benefits of such
communication.
• Obtain sufficient appropriate audit evidence
regarding the financial information of the
entities or business activities within the Group
to express an opinion on the Consolidated
Financial Statements. We are responsible for
the direction, supervision and performance of
the Group audit. We remain solely responsible
for our audit opinion.
We communicate with those charged with
governance regarding, among other matters,
the planned scope and timing of the audit and
significant audit findings, including any
significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with
governance with a statement that we have
complied with relevant ethical requirements
regarding independence, and to communicate
with them all relationships and other matters
that may reasonably be thought to bear on our
independence, and where applicable, related
safeguards.
Copenhagen, 4 February 2020
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no 3377 1231
Mogens Nørgaard Mogensen
State Authorised Public Accountant
mne21404
Gert Fisker Tomczyk
State Authorised Public Accountant
mne9777
CARLSBERG GROUP ANNUAL REPORT 2019 FINANCIAL STATEMENTS
138
Carlsberg A/S
100 Ny Carlsberg Vej
1799 Copenhagen V
Denmark
Phone +45 3327 3300
www.carlsberggroup.com
CVR No. 61056416
Editor: Carlsberg Group Investor Relations
Design & layout: Operate & SkabelonDesign
Photos: Nana Reimers et al.
Proofreading: Borella projects