Carlsberg Group Annual Report 2020

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FY2020 Annual Report · Carlsberg Group

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ANNUAL

REPORT
2020

CARLSBERG GROUP ANNUAL REPORT 2020 TO OUR SHAREHOLDERS

MANAGEMENT
REVIEW

FINANCIAL
STATEMENTS

TO OUR SHAREHOLDERS
Letter from the Chair & the CEO ......... 3

IN BRIEF
Strategic priorities ...................................... 5
Financial achievements ............................ 7
Our regions ................................................... 8
Our brands ................................................. 10
Key figures ................................................. 11

REVIEW AND EXPECTATIONS
COVID-19 .................................................. 12
Group ........................................................... 15
Western Europe ....................................... 18
Asia ............................................................... 21
Eastern Europe ......................................... 24
Capital allocation .................................... 26
2021 earnings expectations ................ 27

STRATEGIC REVIEW
Purpose and ambition ........................... 28
Business model ........................................ 29
Our strategy .............................................. 30
Measuring our progress ........................ 35
Addressing climate risks ....................... 36
Managing risks ......................................... 37

GOVERNANCE
Corporate governance ........................... 40
Supervisory Board................................... 46
Executive Committee ............................. 49
Share information ................................... 51

Forward-looking statements and
ESEF ............................................................. 52

CONSOLIDATED FINANCIAL STATEMENTS
Statements ...........................................54
Notes ......................................................58

PARENT COMPANY FINANCIAL
STATEMENTS
Statements ........................................ 127
Notes ................................................... 130

REPORTS
Management statement ................ 137
Auditor’s reports .............................. 138

OUR ANNUAL
REPORTING

Our annual reporting suite comprises three
reports: Annual Report, Sustainability Report
and Remuneration Report. Each includes
content tailored to its specific audience, and
cross-references to the other reports where
relevant. 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 disclosure in accordance with section 99a
of the Danish Financial Statements Act. It
can be downloaded at this link:
www.carlsberggroup.com/reports-
downloads/carlsberg-group-2020-
sustainability-report/

Front page: Read more about 1664 Blanc on
page 14.

To our shareholders

LETTER FROM THE CHAIR & THE CEO

COMMITMENT
AND RESILIENCE

COVID-19 presented
significant challenges for
our customers, people and
business. We are proud of the
great commitment of all our
employees, which contributed
to the resilience of the Group.

During the year, our top priority was
the health and wellbeing of our
employees, while at the same time
taking the required actions to protect
the health of our business.

Throughout the year, our on-trade
customers in particular were severely
impacted by the pandemic. We were
impressed by the tremendous
resilience and flexibility of our
people, which allowed us to stabilise
the business, support our customers
and help societies. Read more about
our wider response to the COVID-19
challenges on pages 12-14,
including our specific actions in
relation to societies and customers.

A RESILIENT COMPANY
The significantly strengthened
performance of the Group in recent
years was a key prerequisite for the
high degree of resilience – in terms
of our organisation and people, our
financial position and our portfolio –
which helped us navigate through
the uncharted waters of the
pandemic.

ORGANISATION & PEOPLE
RESILIENCE
Early on, we were able to build on
and adapt the way we work as a
company.

From the central office, we provided
clear direction to the regions and
markets with three priorities:
protecting the health and safety
of employees and maintaining
service to customers; protecting
operating profit and cash; and
ensuring our readiness for better
times. Subsequently, we empowered
our country management teams to

translate these priorities into local
action plans – recognising that
while the pandemic was global,
government and consumer responses
were very local.

Across the Group, our employees
showed a high degree of flexibility
and engagement, quickly adapting to
the changing market environment
and operating conditions, and finding
safe and efficient ways of working.
Be it in markets or functions,
everyone went the extra mile,
despite working under very difficult
circumstances.

We are confident that being a
purpose-driven company with a high
level of employee satisfaction and
engagement was crucial for our
ability to navigate through these
uncharted waters.

FINANCIAL RESILIENCE
As early as the beginning of the
year, when COVID-19 hit China, we

CARLSBERG GROUP ANNUAL REPORT 2020 TO OUR SHAREHOLDERS

2020 was a challenging year, significantly impacted
by COVID-19. During the year, the health and
wellbeing of our people was our first priority,
followed by protecting the health of our business.

Flemming Besenbacher, Chair

Cees ’t
Hart

Cees
’t Hart

Flemming
Besenbacher

CARLSBERG GROUP ANNUAL REPORT 2020 TO OUR SHAREHOLDERS

turned the focus onto reducing costs
and preserving our top line.

good earnings, we delivered a solid
free cash flow of DKK 5.1bn.

Regarding costs, we were able to
leverage OCM, our well-established
cost management system, to identify
and execute cost savings.

In terms of top line, our on-trade
customers suffered and we saw a
major channel shift – from on-trade
to off-trade and e-commerce. Due
to the lower volumes and the
negative price/mix, revenue declined
organically by 8.4%. Thanks to our
cost reduction efforts, the organic
decline in operating profit was
confined to 3.1%, while reported
operating margin increased by 70bp
to 16.6%.

In April, we suspended our full-year
guidance for organic growth in
operating profit due to the high level
of volatility and uncertainty. In
August, we issued a new guidance
and, thanks to the resilience and
strong performance of our global
organisation, subsequently upgraded
our guidance twice – in September
and October.

Our strong financial position enabled
us to carry out inorganic transactions,
including the acquisitions of
Marston’s brewing activities in the
UK, Wernesgrüner Brewery in
Germany and the purchase of the
Brooklyn brand rights in our
markets. We also merged our
businesses in China, see page 23.

Furthermore, we made significant
cash returns to our shareholders. In
March, we paid a total dividend of
DKK 3.1bn, and from January to
mid-August our share buy-backs
amounted to DKK 2.9bn. On 5
February 2021, we initiated a 3-
month share buy-back programme
of DKK 750m. Read more about the
share buy-back programmes on
page 26.

At the Annual General Meeting on
15 March 2021, the Supervisory
Board will propose a 5% increase in
the dividend to DKK 22.0 per share
and that 2.9m treasury shares be
cancelled.

We entered the crisis with a strong
balance sheet and an organisation
skilled in proactive cash management.
By maintaining focus on all elements
of working capital and reducing non-
essential CapEx, and supported by

PORTFOLIO RESILIENCE
In recent years, our SAIL’22
choices have improved the strategic
health of the Group and made our
markets and product portfolio more
resilient. We have rationalised and
strengthened our brand portfolio, and

today we have an attractive portfolio
of categories and brands, as
showcased on page 10. In particular,
our investments in and focus on
building the craft & speciality and
alcohol-free brew categories have
delivered strong growth.

Craft & speciality grew by 1%,
despite the category being more
skewed towards the severely
impacted on-trade channel. Alcohol-
free brews grew by 11%, supported
by increased awareness of health
and wellbeing among consumers,
possibly fuelled by the pandemic.

RESPOND AND RESET
Our strategic priorities (see pages
30-34) remain valid and will be
instrumental for our growth
aspirations, although we expect the
challenges and uncertainty of 2020
to continue for some time to come.
Consequently, we are taking steps to
reorient the company for the
sustained uncertainty.

There are two elements to this.
Respond is focused on being ready
for and responsive to changes in
consumer and customer demands.
Reset addresses our cost base to
align it with the changed market
environment. Unfortunately, as part
of this we have had to depart with
good colleagues. Read more about
Respond and Reset on pages 13-14.

ADVANCING SUSTAINABILITY
We are continuing to drive progress
towards our ambitious targets in our
sustainability programme Together
Towards ZERO. To ensure the right
focus for our activities, in 2020 we
updated our materiality assessment
and carried out a comprehensive
water risk assessment in partnership
with WWF.

Recognising the impact of climate
change on our business, we have
become a supporter of the Task
Force on Climate-related Financial
Disclosures (TCFD). In this report, we
take the first steps in disclosing
climate-related risk to our business,
using the TCFD framework.

As part of our annual reporting
suite, along with the Annual Report
and the Remuneration Report, our
Sustainability Report contains a
wealth of data, insights into our
achievements to date and our future
plans, a summary of which can be
found in this report on pages 6 and
33-35.

CHANGES TO THE SUPERVISORY
BOARD
At the Annual General Meeting, the
Supervisory Board will propose
Henrik Poulsen, former CEO of
Ørsted, as a new member. The
Supervisory Board will also propose
that Henrik Poulsen become Deputy
Chairman of the Supervisory Board,

replacing Lars Fruergaard Jørgensen.
Lars Fruergaard Jørgensen will
remain as a member of the
Supervisory Board. In addition,
Domitille Doat-Le Bigot has notified
the Supervisory Board that she is not
standing for re-election at the
Annual General Meeting.

THANK YOU
We will remember 2020 for the
significant challenges presented to
everybody by COVID-19. We are
deeply impressed by the high level of
engagement and commitment of our
colleagues during the year. We want
to take this opportunity to say thank
you to each and every one –
current employees and those who
unfortunately had to leave the Group.

We would also like to acknowledge
our shareholders for their support
and trust during the year.

Finally, we would like to thank all our
suppliers and customers – not least
our highly-challenged on-trade
customers – for their cooperation
during the difficult times in 2020. We
will continue to support our on-trade
customers the best way we can and
we hope for a brighter and more
cheerful 2021.

Flemming
Besenbacher

Chair

Cees
’t Hart

CEO

STRATEGIC PRIORITIES

2020
HIGHLIGHTS

COVID-19 was a stress test for our SAIL’22 strategy.
Notwithstanding the immense hardship posed by the
pandemic for many people, including our on-trade
customers, our strategic priorities proved resilient.

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

STRENGTHEN THE CORE

SUPPORTING
THE ON-TRADE

Across our markets, we developed innovative
ways to support our on-trade customers during
the challenging period of COVID-19, including
digital solutions enabling them to leverage online
channels such as online delivery platforms,
launch their own website for takeaway, and
navigate the world of digital and social marketing.
Another initiative was Adopt a Keg, which
rewarded consumers buying Carlsberg for home
consumption with free draught beer that could be
redeemed at local on-trade outlets.

FUNDING
THE JOURNEY
CULTURE

Our Funding the
Journey culture, with
its focus on efficiencies
and costs, was the most
important driver of our
financial performance
in 2020. Read more
on pages 13 and 31.

POSITION FOR GROWTH

RESILIENCE OF OUR
GROWTH PRIORITIES

GROWING
IN CHINA

Our alcohol-free brew and craft &
speciality portfolios demonstrated their
strength during the year, delivering
growth of 11% and 1% respectively. Our
international speciality brand 1664 Blanc
saw impressive growth of 8%, while
Grimbergen declined by 2%, impacted by
challenges in France. Our international
cider brand, Somersby, grew by 2%.

For a number of years, our Chinese business
has delivered consistently strong results.
Despite the significant nationwide lockdown
at the beginning of 2020 and subsequent
local lockdowns during the remainder of
the year, volumes and revenue/hl grew. Key
drivers were the premium brands, our big
city strategy, and strong performance in
e-commerce and modern off-trade.

CREATE A WINNING CULTURE

SUPPORTING
OUR COMMUNITIES

Our purpose of brewing for a better
today and tomorrow is deeply rooted in
our culture. We took pride in being able to
assist local communities in the fight against
COVID-19. Our many initiatives included the
production of hand sanitiser, donations of
protective and testing equipment and alcohol-
free beverages to healthcare workers, and
financial donations to local organisations.

STRATEGIC PRIORITIES

TOGETHER
TOWARDS ZERO

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.

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

ZERO
CARBON
FOOTPRINT

-12%

By 2030, we aim to eliminate carbon
emissions at our breweries and cut
our beer-in-hand carbon footprint by
30% compared with 2015. In 2020, we
reduced relative carbon emissions by
12%, and from 2015 to 2019 we reduced
our beer-in-hand footprint by 7%.

ZERO
WATER
WASTE

-7%

We are committed to eliminating water waste
from brewing and to safeguarding shared
water resources in high-risk areas. By 2030,
we aim to reduce our water consumption
by 50% compared with 2015. In 2020, we
reduced our water consumption by 7%, and
since 2015 we have reduced it by 18%.

TOGETHER TOWARDS ZERO

ZERO
IRRESPONSIBLE
DRINKING

100%

We are proud of our great beer brands,
which for many people are at the heart of
social occasions, and we want everyone
to enjoy our products responsibly. All our
beers and ciders carry messages or icons
advising consumers not to drink-drive and
not to drink when underage or pregnant.

ZERO
ACCIDENTS
CULTURE

-19%

Safeguarding the health and safety
of everyone working for Carlsberg
is key to how we do business, and
our 2030 target is to have zero lost-
time accidents. In 2020, the lost-time
accident rate went down by 19% to 3.0
from 3.7 in 2019.

TOGETHER TOWARDS ZERO

READ MORE ABOUT SAIL'22
ON PAGES 30-34.

FINANCIAL ACHIEVEMENTS

RESILIENCE, COST CONTROL
AND CASH DELIVERY

TOP- AND BOTTOM-LINE GROWTH, STRONG CASH FLOW AND IMPROVING RETURNS,
ALBEIT RESULTS IN 2020 IMPACTED BY COVID-19 CHALLENGES

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

While results in 2020 were
impacted by COVID-19, the
Group showed a high degree
of financial resilience thanks to
our Funding the Journey
culture and discipline.

The market decline and prolonged
on-trade closures in many markets
impacted our top line negatively.
However, our well-embedded
Funding the Journey culture, with its
relentless focus on costs and early
intervention, enabled us to partly
offset this headwind, limiting the
decline in operating profit. The
operating margin and ROIC
improved, free cash flow was solid
and financial leverage of 1.51x was
well within our target of below 2x
NIBD/EBITDA. Read about the
results on pages 15-17 and in the
consolidated financial statements.

We also continued to return cash to
shareholders by delivering on our
dividend policy and conducting share
buy-backs. Total cash return to
shareholders in 2020 amounted to
DKK 6bn. Read more on page 26.

1 Comparative figures for 2016-2018 and 2016 have not been restated to include IFRS 16 and IFRS 15 respectively .

OUR REGIONS

THREE REGIONS
24 NO. 1 OR 2 POSITIONS

75% of our volumes are sold in these
24 markets. The strength of our
geographic exposure was evident
during the COVID-19 pandemic, when
the different timing of government
actions and the impact and scale of
market consequences provided early,
valuable learnings, helping us
navigate the uncharted waters.

WESTERN EUROPE

54%

SHARE OF GROUP
REVENUE

46%

SHARE OF GROUP
OPERATING PROFIT

Our beer markets in Western Europe are generally
flat in volume terms. Our agenda in the region
is to improve margins by premiumising our
portfolio, executing value management, improving
efficiencies and reducing cost.

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

EASTERN EUROPE

17%

SHARE OF GROUP
REVENUE

18%

SHARE OF GROUP
OPERATING PROFIT

We have strong market positions in
Eastern Europe. In 2020, we strengthened
our market share in Russia by taking
appropriate actions in response to a highly
promotional market environment.

ASIA

29%

SHARE OF GROUP
REVENUE

36%

SHARE OF GROUP
OPERATING PROFIT

Our Asia footprint comprises diverse but
complementary markets. It is our growth region,
and our focus is on growing volumes, expanding
our international brands and premiumising local
brands while being cost-efficient.

OUR REGIONS

NEW REGIONAL
STRUCTURE

As of 1 January 2021, we have changed our regional
structure to optimise regional management and ensure
a better balance between our European regions.
The new regions and share of Group are shown here.

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

WESTERN EUROPE

ASIA

Denmark, Finland, France, Germany, Norway, Poland,
Portugal, Sweden, Switzerland, UK.

Cambodia, China, Hong Kong SAR, India, Laos, Malaysia,
Myanmar, Nepal, Singapore, Vietnam.

CENTRAL & EASTERN EUROPE

Former Eastern Europe: Azerbaijan, Belarus, Kazakhstan,
Russia, Ukraine. Former Western Europe: Baltics, Bulgaria,
Croatia, Greece, Italy, Serbia, Export & License.

29%
44%
36%

SHARE OF GROUP
VOLUME

SHARE OF GROUP
REVENUE

SHARE OF GROUP
OPERATING PROFIT

31%
29%
36%

SHARE OF GROUP
VOLUME

SHARE OF GROUP
REVENUE

SHARE OF GROUP
OPERATING PROFIT

40%
27%
28%

SHARE OF GROUP
VOLUME

SHARE OF GROUP
REVENUE

SHARE OF GROUP
OPERATING PROFIT

SEE PAGES 121-122 FOR
RESTATED FIGURES.

OUR BRANDS

AN ATTRACTIVE
BEER PORTFOLIO

Our beer portfolio spans
our core beer brands, craft
& speciality brands and
alcohol-free brews.

CORE BEER
Our local power brands each have a
long history in their markets, enjoying
high levels of consumer loyalty.

CRAFT & SPECIALITY (C&S)
Our C&S portfolio includes our
international speciality brands,
local craft brands and the
international cider brand Somersby.
This attractive portfolio has
delivered strong growth in recent
years, supporting the continued
margin progression of the Group.

The importance of core beer was
evidenced even further during the
COVID crisis, as consumers turned to
these well-known brands – often in
multipacks – when doing their off-
or online shopping.

Despite severe restrictions
imposed on the on-trade in 2020,
our C&S volumes grew by 1%,
with particularly strong growth in
markets such as Poland, Norway,
Switzerland, Russia and China.

Our core international brands were
impacted by COVID-19 government
measures in significant markets.
Tuborg volumes grew by 15%
in Russia and increased slightly
in China, but this was offset by
challenges in other large markets,
such as India and Nepal, and total
brand volumes declined by 9%.
Carlsberg volumes were down 10%,
impacted by the market declines
in India, Malaysia and Denmark
and the closure of the night
entertainment channel in China.

ALCOHOL-FREE BREWS (AFB)
AFB was positively impacted
by an acceleration in consumer
awareness of health and wellbeing,
as the pandemic took its toll
across the world.

Driven by good results for the
AFB offerings of our local power
brands in Western Europe and
Eastern Europe, our AFB volumes
continued the positive trajectory,
growing by 11%.

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

CORE BEER

GROWTH CATEGORIES

90% 10%
of own beer volumes

INTERNATIONAL BRANDS

CRAFT & SPECIALITY

82% 18%
of own beer revenue

LOCAL POWER BRANDS

ALCOHOL-FREE BREWS

KEY FIGURES

FIVE-YEAR SUMMARY

CARLSBERG GROUP ANNUAL REPORT 2020 IN BRIEF

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

Attributable to

Non-controlling interests

Shareholders in Carlsberg A/S (net profit)

Shareholders in Carlsberg A/S, adjusted²

Statement of financial position

Total assets

Invested capital

Invested capital excl. goodwill

Net interest-bearing debt (NIBD)

Equity, shareholders in Carlsberg A/S

Statement of cash flows

Cash flow from operating activities

Cash flow from investing activities

Free cash flow

2020

2019

2018¹

2017¹

2016¹

2020

2019

2018¹

2017¹

2016¹

110.1

20.0

113.0

21.9

112.3

20.8

107.1

19.2

116.9

21.9

Investments

Acquisition of property, plant and
equipment and intangible assets, net³
Acquisition and disposal of subsidiaries,
net

-4,396

-4,592

-4,027

-4,053

-3,840

-2,409

-974

268

1,969

58,541

28,361

14,085

9,699

-247

-411

9,041

-2,233

6,808

65,902

62,503

60,655

32,638

15,007

10,465

501

-738

10,228

-2,751

7,477

31,220

13,420

9,329

-88

-722

8,519

-2,386

6,133

30,208

13,583

8,876

-4,565

3,523

-1,458

2,065

778

6,030

6,363

908

6,569

6,160

824

5,309

5,359

806

1,259

4,925

62,614

31,419

13,006

8,245

251

Financial ratios

Gross margin

EBITDA margin

Operating margin

Effective tax rate

-788

-1,247

Return on invested capital (ROIC)

7,249

-2,392

4,857

371

4,486

3,881

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, adjusted4

Share price (B shares)

Market capitalisation

DKK

48.4

24.1

16.6

24.7

8.9

23.2

33.1

0.49

1.51

23.59

41.3

43.6

34.5

22.0

49.5

22.8

15.9

26.9

8.8

22.4

35.3

0.41

1.25

14.17

43.7

41.0

65.9

21.0

50.0

21.5

14.9

28.0

8.1

20.9

38.5

0.36

1.29

12.92

34.8

35.2

40.2

18.0

49.8

22.4

14.6

41.4

6.9

15.7

41.1

0.40

1.45

11.26

8.3

32.3

56.9

16.0

194

50.2

20.8

13.2

33.0

5.9

12.7

40.0

0.48

1.96

6.61

29.4

25.4

56.5

10.0

DKK

975.2

993.8

692.6

745.0

609.5

DKKm

142,676

145,805

104,830

112,116

92,896

118,816

123,063

117,700

114,251

126,906

81,541

31,049

21,263

39,308

86,162

33,032

18,776

43,449

82,721

84,488

31,792

17,313

33,991

19,638

45,302

46,930

96,089

43,225

25,503

50,811

10,928

-5,871

5,057

12,239

-2,277

9,962

12,047

-5,891

6,156

11,834

-3,154

8,680

9,329

-713

8,616

Number of shares at year-end, excl.
treasury shares

Average number of shares, excl. treasury
shares

1,000

145,102

147,996

152,457

152,390

152,552

1,000

146,104

150,411

152,428

152,496

152,552

Number of issued shares at year-end

1,000

148,157

152,557

¹ Comparative figures for 2016-2018 and 2016 have not been restated to include IFRS 16 and IFRS 15 respectively.
² Adjusted for special items after tax.

³ Includes the acquisition of the Brooklyn brand rights, DKK 0.8bn in 2020.
4 Proposed dividend on number of shares at year-end as a percentage of net profit adjusted for special items after tax.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Review and expectations

COVID-19

NAVIGATING
UNCHARTED WATERS

The COVID-19 pandemic
affected lives worldwide. From
the beginning, we had three
priorities: protecting our
people, protecting earnings
and cash, and preparing for
the rebound.

Below, we summarise the impact of
COVID-19 on our business and our
mitigating actions – in light of our
three priorities – during the year.

MARKET IMPACT
Beer is most often enjoyed in social
settings, and markets across our
regions were therefore impacted by
restrictions and lockdowns, which
prevented consumers from engaging
in social activities. Some markets
benefited from populations not being
able to travel, while others suffered
from lack of tourism or temporary
ruralisation, as migrant workers left
the cities.

ON-TRADE
For the Group, the on-trade channel
accounts for around 25% of volumes
(2019 figures). Exposure is at the

same level in Western Europe, above
average in Asia and very small in
Eastern Europe. Across our markets,
the on-trade in particular was
affected by a range of government
interventions, including lockdowns,
restrictions on people gathering etc.,
although the length and severity of
these measures differed between
markets.

In local markets, we found ways to
support our on-trade customers.
These included support for developing
on-line delivery and take-away
platforms, and encouraging
consumers to return to their on-trade
outlet by donating free draught beer.

OFF-TRADE
The impact on the off-trade varied
significantly between markets,
depending on government actions
and their influence on consumer
behaviour. In some markets, off-
trade volumes grew by double-digit
percentages, while other markets
saw double-digit-percentage decline.

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Overall, off-trade volumes increased,
though not enough to offset the
volume decline in the on-trade.

E-COMMERCE
During the year, we saw rapid
acceleration on e-commerce and
digital platforms. Our third-party
e-commerce sales were up by
approximately 60%, with particularly
strong growth in Asia.

SUPPORTING OUR PEOPLE
During the year, our people worked
under very difficult circumstances,
whether at our breweries, in sales or
from home. A total of 1,756 COVID-
19 cases were recorded among our
40,000 or so employees. Very sadly,
five employees died from the
infection.

Our first priority was to protect the
physical health of our people. In
order to minimise the risk of
infection, we implemented several
initiatives. At the breweries, these
included working in shifts and
expanding the use of protective
equipment. At our offices, we put in
place rigorous procedures to
minimise the risk of infection, and
many employees worked from home.

within the leadership team, setting
priorities and aligning objectives
across markets and functions. For
the many employees required to
work remotely, we offered virtual
training and tools to help them cope
with the new challenges.

We intensified the top management
communication by introducing
regular CEO video messages on the
intranet, virtual townhalls and
fireside chat with the Executive
Committee.

SUPPORTING COMMUNITIES
During the crisis, it was very
important for us to support and
contribute to the communities as
best as we could. In local markets,
our businesses engaged in the
production of hand sanitiser, donated
protective and testing equipment and
alcohol-free beverages to healthcare
workers, and made financial
donations to local organisations.

In addition, our largest shareholder,
the Carlsberg Foundation, made
donations amounting to more than
DKK 100m to support COVID-19-
related research, culture and civil
society.

Our second priority was to strengthen
communication and safeguard the
mental wellbeing of our people. We
strengthened and increased our
overall communication, including

SECURING THE FINANCIAL
HEALTH OF THE BUSINESS
Group volumes were down
organically by 3.8% and revenue/hl
was -5%. The former was due to

declines in Western Europe and Asia,
while the latter was impacted by
channel mix due to the decline in the
on-trade as well as channel shift
within the off-trade, increased
demand for multipacks and
mainstream brands, and country mix
characterised by growth in markets
with lower-than-average price levels.

Responding to the impact of COVID-
19 on revenue, significant changes
were implemented to safeguard the
financial health of our company,
both in terms of protecting the year’s
results and cash, and ensuring that
we will be able to capture long-term
growth opportunities.

SAFEGUARDING OPERATING PROFIT
As early as January, we started
taking steps to reduce costs.

In the supply chain, we reduced the
production planning cycle from one
month to 1-2 weeks and the number
of SKUs to increase flexibility in the
light of unpredictable supply and
demand. This led to sharper focus,
less complexity and larger batch sizes.

We reinforced our Funding the
Journey culture, accelerated
efficiencies and initiated further cost
reductions. A key enabler was our
well-embedded Operating Cost
Management (OCM) toolkit, with 15
specific cost groups for which we
rigorously initiated actions and

monitored savings and gap-closing
progress. Our early actions led to
significant cost reductions during the
year, with savings achieved in almost
all cost groups, including professional
services, travel, entertainment,
people and marketing spend. Some
savings will be permanent, while
others, including marketing, will not.
Our many actions limited the organic
decline in operating profit to 3.1%.

Notwithstanding COVID-19, our
long-term strategic priorities and
ambitions remain intact, and we
continued to support and invest in
our brands and activities to safe-
guard the long-term health of the
Group and our growth opportunities.

PROTECTING CASH AND LIQUIDITY
To protect cash flow and secure
strong liquidity and financial
flexibility, the Group implemented
several initiatives, such as further
stepping up our trade working capital
management and reducing or
deferring capital expenditures.

In March, we established a new
short-term bank credit facility, and
in March and June respectively we
issued two bonds at very attractive
rates. Read about our financial
performance, cash and liquidity on
pages 15-17.

Our strong balance sheet, combined
with the measures taken to protect

cash and liquidity during the crisis,
meant that the Group’s financial
position remained very strong
throughout the year and that we
were able to engage in M&A
transactions despite the COVID-19
headwind.

PREPARING FOR THE REBOUND
The future remains uncertain,
including the longer-term impact on
the global economy and consumer
spending. For the beer industry, the
longer-term impact on the on-trade
is uncertain, as are longer-term
changes in consumer preferences in
terms of channels, brands and price
points.

While our SAIL’22 strategy (see
pages 30-35) remains unchanged,
we reshaped and reoriented our
organisation and plans to allow us to
meet the known and unknown
challenges we will face going forward.

RESPOND FOR TOP-LINE GROWTH
We will respond to the challenges
ahead of us by sharpening our focus
and building increased flexibility into
our planning. We are prioritising
fewer brands and activities. Within
core beer, we are intensifying the
focus on our local power brands and
international premium brands, such
as Carlsberg and Tuborg. With
respect to innovation, we are
targeting our efforts towards more
focused and efficient initiatives.

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Using our value management
approach, we will ensure that we
hit the right price points. We are
working with and supporting the on-
trade to prepare for the new reality.
In addition, we are investing in
and expanding our e-commerce
activities.

RESET FOR THE FUTURE
Recognising the need to reset, we
initiated a review of our total cost
base towards the end of the year.
This led to a significant reduction in
costs in our central, regional and
support functions as well as in the
supply chain. Unfortunately, this

meant that we had to depart with
valued colleagues.

In our markets, we are ensuring the
right structures to accommodate a
potentially smaller on-trade and
changes within off-trade subchannels.
We also scrutinised all other non-
essential spending and anticipate
targeted reductions going forward.

The learnings from the COVID-19
pandemic, including a high degree of
flexibility, rapid adaptation to sudden
and very new challenges, and new
ways of working, have been positive.
We are taking steps to ensure that
these learnings are embedded in our
future ways of working.

+8%

1664 BLANC VOLUME GROWTH

Despite COVID-19, in 2020 we
continued to invest in our key
strategic priorities, including the
launch of a new global
communication platform for 1664
Blanc – Good Taste with a Twist – in
order to invigorate this iconic French
speciality beer. The campaign
modernises the brand’s premium
credentials and realigns it with its
French heritage. Recognising COVID-
19’s impact on consumers’ lives, an

online video series, Chef at Home,

was a key part of the new platform.
The videos were produced to elevate
stay-at-home moments by offering
tasty yet simple recipes inspired by
French cuisine but with a twist.
When developing the campaign, our
central team liaised with the brand’s
largest markets, including China and
Russia. 1664 Blanc grew strongly in
both markets.

GROW CRAFT & SPECIALITY

GROUP

MARGIN IMPROVEMENT
AND STRONG CASH FLOW

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

2020 was a challenging and
very volatile year for the
Group, significantly impacted
by the COVID-19 pandemic.

As a result of the high level of
volatility and uncertainty during the
year, we had to suspend the full-
year guidance in April and did not
issue new guidance until August,
after which we issued two earnings
upgrades. See table on the right-
hand side.

VOLUMES
Group beer volumes were 110.1m hl,
declining organically by 2.8%, as
they were impacted by COVID-19 in
most markets. Non-beer volumes
were 20.0m hl, declining organically
by 8.7%. In addition to COVID-19,
non-beer volumes were impacted by
lower sales of soft drinks at the
German/Danish border.

INCOME STATEMENT
Revenue was DKK 58.5bn. Organic
decline was 8.4%. Revenue per hl
declined organically by 5%. Price/mix
was negatively impacted by country,
channel, product and packaging mix,
and in Russia by higher promotions.
Reported revenue declined by 11.2%
due to currencies, mainly related to
the Russian, Norwegian and Chinese
currencies.

Gross profit was DKK 28.4bn. The
organic decline was 10%, while COGS
per hl improved organically by 3%,
positively impacted by efficiencies
and country and product mix. The
gross margin declined by 110bp to
48.4%, as supply chain efficiencies
were not enough to offset the
under-absorption of fixed costs and
the channel and product mix. The
gross margin was also impacted by
country mix.

Total volumes declined organically
by 3.8%, while reported decline was
3.6% due to the acquisition of
Marston’s brewing activities in the
UK in October.

Operating expenses declined
organically by 14% as a result of
tight cost control enabled by our
Operating Cost Management toolkit.
The main areas in which costs fell

were marketing, travel, supply chain
and employee-related costs.

Reported operating expenses as a
percentage of revenue declined by
200bp to 32.2%. Excluding marketing
expenses, operating expenses
declined organically by 13%.

Operating profit before depreciation,
amortisation and impairment losses
(EBITDA) declined by 2.4%
organically and in reported terms by
6.1%. The EBITDA margin improved
by 130bp to 24.1%.

Operating profit declined organically
by 3.1%. We saw solid growth in Asia
and Eastern Europe, while operating
profit declined in Western Europe.
Reported operating profit was DKK
9.7bn, corresponding to a decline of
7.3%. The reported operating margin
improved by 70bp to 16.6%.

Earnings expectations 2020

Date

4 February

2 April

13 August

17 September

27 October

Volume (million hl)

Beer

Non-beer

Total volume

DKK million

Revenue

Operating profit before special items

Operating margin (%)

Expectation for operating profit

Mid-single-digit percentage organic growth

Guidance suspended

Organic decline of 10-15%

High-single-digit percentage organic decline

Mid-single-digit percentage organic decline

Change

2019

113.0

21.9

134.9

Organic

Acq., net

-2.8%

-8.7%

-3.8%

0.2%

0.0%

0.2%

2020

110.1

20.0

130.1

Change

Reported

-2.6%

-8.7%

-3.6%

65,902

10,465

15.9

-8.4%

-3.1%

0.3%

-0.3%

-3.1%

-3.9%

58,541

9,699

16.6

-11.2%

-7.3%

70bp

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Section 1 in the consolidated
financial statements contains more
details on operating activities.

Net special items (pre-tax) amounted
to DKK -247m (2019: DKK +501m).
Special items were positively impacted
by reversal of provisions made in
purchase price allocations in previous
years, offset mainly by restructuring
costs, including costs related to the
Reset for the future initiative (see
page 14), and impairment of brands,
including the Angkor brand in
Cambodia. Special items were also
impacted by one-off costs related to
COVID-19, including safety measures
and donations. Read more about net
special items in section 3.1 in the
consolidated financial statements.

Financial items, net, amounted to
DKK -411m against DKK -738m in
2019. Excluding currency gains and
losses, financial items, net, amounted
to DKK -550m (2019: DKK -650m),
positively impacted by lower other
financial expenses. Currency gains
were mainly related to USD/EUR
deposits in Eastern Europe. Read
more about net financial items in
section 4.1 in the consolidated
financial statements.

Tax totalled DKK -2,233m against
DKK -2,751m in 2019. The effective
tax rate of 24.7% was positively
impacted by the net impact of tax-
exempt and non-deductible special

items. Excluding these, the effective
tax rate would have been 25.7%.
Read more about tax in section 6 in
the consolidated financial statements.

Non-controlling interests were DKK
778m (2019: DKK 908m), mainly
impacted by challenging market
conditions in Malaysia and the new
Carlsberg Marston’s Brewing
Company in the UK, of which the
Group owns 60%. Read more about
non-controlling interests in section
5.3 in the consolidated financial
statements.

The Carlsberg Group’s share of
consolidated profit (net profit) was
DKK 6,030m against DKK 6,569m in
2019. The decline was due to lower
operating profit and special items,
partly offset by lower financial
expenses, net, and the lower tax rate.

Adjusted net profit (adjusted for
special items after tax) was DKK
6,363m (2019: DKK 6,160m).

STATEMENT OF FINANCIAL
POSITION
ASSETS
Total assets amounted to DKK
118,816m at 31 December 2020 (31
December 2019: DKK 123,063m).
The decline was mainly due to lower
intangible assets, property, plant and
equipment and trade receivables,
partly offset by an increase in cash.

Intangible assets amounted to DKK
66,061m at 31 December 2020 (31
December 2019: DKK 70,027m).
The decline was mainly due to the
depreciation of currencies in Eastern
Europe and Asia.

Property, plant and equipment
totalled DKK 26,299m (31
December 2019: DKK 27,607m).
The decline of DKK 1,308m was
primarily due to depreciation, lower
CapEx and currencies.

Current assets amounted to DKK
18,996m (31 December 2019: DKK
17,948m). Trade receivables
declined by DKK 1,614m, mainly
attributable to lower sales due to
COVID-19 and higher provisions for
bad debt. Inventories of DKK
4,613m were slightly below last year
(31 December 2019: DKK 4,751m).
Cash and cash equivalents amounted
to DKK 8,093m (31 December 2019:
DKK 5,222m), positively impacted
by the two EUR 500m bonds issued
in March and June respectively.

Section 2 in the consolidated
financial statements contains more
details on assets.

EQUITY AND LIABILITIES
Equity
Equity amounted to DKK 43,362m
at 31 December 2020 (31 December
2019: DKK 46,034m), DKK 39,308m
of which was attributed to

shareholders in Carlsberg A/S and
DKK 4,054m to non-controlling
interests.

financial statements contains more
details on borrowings.

The net change in equity of DKK
-2,672m was explained by the
consolidated profit of DKK 6,808m,
non-controlling interests of DKK
3,758m, which were impacted by fair
value adjustments of contingent
considerations, and acquisition of
entities of DKK 1,027m, offset by
the dividend payout, including non-
controlling interests of DKK -
3,898m, the share buy-backs of
DKK -2,900m and foreign exchange
adjustment in other comprehensive
income of DKK -7,640m.

Liabilities
Total liabilities were DKK 75,454m
against DKK 77,029m at 31
December 2019. The decline was
impacted by lower trade payables
and other liabilities.

Long- and short-term borrowings
increased by DKK 5,259m compared
with 31 December 2019. The
increase was due to the issuance of
two EUR 500m bonds in March and
June respectively. At 31 December
2020, long-term borrowings were
DKK 29,291m (31 December 2019:
DKK 20,879m) and short-term
borrowings were DKK 959m (31
December 2019: DKK 4,112m).
Section 4 in the consolidated

Tax liabilities, retirement benefit
obligations etc. were DKK 17,714m
(31 December 2019: DKK 22,839m).
The decline was mainly due to fair
value adjustments of contingent
considerations.

Current liabilities excluding short-
term borrowings decreased to DKK
27,490m (31 December 2019: DKK
29,199m). Trade payables declined
by DKK 551m, impacted by
currencies partly offset by trade
payables acquired in connection with
the acquisition of Marston’s brewing
activities in the UK. Other current
liabilities, excluding deposits on
returnable packaging, declined by
DKK 889m, impacted by lower
bonus accruals and VAT.

CASH FLOW
Free cash flow amounted to DKK
5,057m versus DKK 9,962m in
2019, mainly impacted by the lower
EBITDA, a lower net contribution
from the change in working capital
and acquisitions.

Net cash flow amounted to DKK
3,247m (2019: DKK -331m). The
increase from 2019 was mainly due
to external financing of DKK 5,060m
(2019: DKK -935m), impacted by
two bond placings of EUR 500m in
March and June and lower non-

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

controlling interests of DKK -877m
(2019: DKK -2,520m), partly offset
by higher dividends of DKK 3,093m
paid to shareholders in March (2019:
DKK 2,738m) and a lower share
buy-back in 2020 of DKK 2,900m
compared to DKK 4,100m in 2019.

CASH FLOW FROM OPERATING
ACTIVITIES
Cash flow from operating activities
amounted to DKK 10,928m against
DKK 12,239m in 2019.

EBITDA was DKK 14,085m (2019:
DKK 15,007m).

The change in trade working capital
was DKK +1,321m (2019: DKK
+491m), mainly due to strong cash
management discipline and lower
trade receivables, the latter impacted
by lower sales. Average trade
working capital to revenue for the
year was -18.6% compared to
-16.8% for 2019, supported by
the lower revenue.

The change in other working capital
was DKK -1,033m (2019: DKK
+634m), mainly impacted by lower
VAT payable, change in provisions
and a reclassification to trade
working capital.

Restructuring costs paid amounted
to DKK -531m (2019: DKK -445m).
Net interest etc. paid amounted to
DKK -424m (2019: DKK -894m).

The decline was mainly due to the
settlement of financial instruments.
Corporation tax paid was DKK
-1,958m (2019: DKK -2,234m).
The decrease versus last year was
mainly due to lower earnings.

CASH FLOW FROM INVESTING
ACTIVITIES
Cash flow from investing activities
was DKK -5,871m against DKK
-2,277m in 2019.

Operational investments totalled
DKK -3,835m (2019: DKK
-2,824m). In 2019, operation
al investments were impacted by
the disposal of the brewery sites in
Norway and Germany.

Acquisition of property, plant and
equipment and intangible assets
(CapEx) amounted to DKK -4,396m
(2019: DKK -4,588m). Excluding the
purchase of the Brooklyn brand
rights, CapEx declined by DKK 1.0bn
to DKK 3.6bn due to lower sales
CapEx, fewer returnable glass bottles,
fewer investments in draught lines,
and cancellations or postponements
of non-business-critical projects.

Total financial investments amounted
to DKK -2,036m (2019: DKK
+551m). The increase was due to the
acquisition of Marston’s brewing
activities, the prepayment for the
acquisition of Wernesgrüner Brewery
and lower dividends received. Read

more about the acquisitions in section
5.2 in the consolidated financial
statements.

RETURN ON INVESTED CAPITAL
Return on invested capital (ROIC)
improved by 10bp to 8.9%, mainly
driven by the lower effective tax rate
and supported by lower capital
employed. The latter was positively
impacted by trade working capital, a
lower CapEx/depreciation ratio and
currencies.

ROIC excluding goodwill improved by
80bp to 23.2%.

FINANCING
At 31 December 2020, gross
financial debt amounted to
DKK 30,250m and net interest-
bearing debt to DKK 21,263m.
The difference of DKK 8,987m
mainly comprised cash and cash
equivalents of DKK 8,093m. At 31
December 2020, the average
duration was 5.6 years.

The net interest-bearing
debt/EBITDA ratio increased to
1.51x (1.25x at year-end 2019).
Read more about net interest-bearing
debt in section 4.2 in the consolidated
financial statements.

Of the gross financial debt, 97%
(DKK 29,291m) was long term, i.e.
with maturity of more than one year
from 31 December 2020.

To secure continued strong liquidity
and financial flexibility, we issued a
10-year EUR 500m bond with a
coupon of 0.625% on 4 March and a
7-year EUR 500m bond with a
coupon of 0.375% on 16 June. 81%
of the net financial debt was
denominated in EUR and DKK (after
swaps). Read more about our funding
and liquidity in section 4.7 in the
consolidated financial statements.

SHARE BUY-BACKS
2019 PROGRAMME
In January 2020, the Group bought
393,501 shares under the share
buy-back programme initiated in
2019. The total purchase price
amounted to DKK 0.4bn.

2020 PROGRAMME
In 2020, the Group carried out a
share buy-back programme
amounting to DKK 2.5bn. The Group
bought 2,897,021 shares at an
average repurchase price of DKK 863
per share, in total DKK 2.5bn.

Read more about the share buy-
back programmes, including the
2021 programme, on page 26.

WESTERN EUROPE

A YEAR OF VOLATILITY
AND UNCERTAINTY

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Western Europe had a volatile
year. COVID-19 severely
impacted results in Q2 and Q4,
while Q3 brought some relief
due to fewer restrictions
during the summer months.

Western Europe is our largest region,
accounting for almost 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
The Western Europe region had a
challenging and volatile year. The
region delivered strong results in Q3,

including beer volume growth
supported by favourable weather,
while Q2 and Q4 were challenging,
with declining volumes due to
restrictions and lockdowns, which
particularly impacted the on-trade
channel.

Beer volumes declined organically
by 4.8%, while the organic decline in
total volumes was 7.3%. The decline
in non-beer volumes was due to the
lost German/Danish border trade
from 1 January 2020, compounded
by the impact from on-trade
closures. The positive acquisition
impact of 40bp came from the
acquisition of Marston’s brewing
activities, which was consolidated
from the end of October.

Revenue/hl was reduced organically
by 6%, impacted in all markets by
channel mix and, for the region, by
country mix. Revenue declined
organically by 12.8%, while reported
revenue declined by 13.1% due to a
negative currency impact, mainly
related to the Norwegian krone,

Volume (million hl)

2019

Organic

Acq., net

2020

Reported

Change

Beer

Non-beer

Total volume

DKK million

Revenue

Operating profit before special items

Operating margin (%)

46.6

15.3

61.9

-4.8%

-14.9%

-7.3%

0.5%

0.0%

0.4%

44.6

13.0

57.6

-4.3%

-14.9%

-6.9%

36,317

6,187
17.0

-12.8%

-17.2%

0.6%

-0.6%

-0.9%

-1.5%

31,547

4,993

-13.1%

-19.3%

15.8

-120bp

partly offset by the stronger Swiss
franc.

We achieved significant cost savings
within supply chain, logistics,
marketing and administration,
though these savings were
insufficient to cover the revenue
decline. Operating profit therefore
declined organically by 17.2%. The
development was particularly bad in
Q2 and Q4 due to the severe
COVID-19-related market situation.

The operating margin was 15.8%
(-120bp). Some markets delivered
good operating margin improvement,
though this was offset by the
significant headwinds in some
markets.

THE NORDICS
Our Danish off-trade volumes grew,
though not enough to compensate
for lower on-trade and border
volumes. Mainly due to the change
to German/Danish border trade in
soft drinks from 1 January 2020,
total volumes in Denmark declined
by more than 25%. Excluding the lost
border trade, volumes declined by
mid-single-digit percentages due to
restrictions and lockdowns.

Our Norwegian business delivered
solid double-digit-percentage
volume growth, supported by good
weather during the summer,
domestic tourism and less border
trade in Sweden due to the closure of
the border. Our local power brand
Frydenlund, Tuborg and craft &

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Consumption characteristics

Our position

Our
operations

Per capita
beer
consumption
(litres)

On-trade
share of
market,
approx. (%)

Market
position (no.)

Market
share¹ (%)

Breweries²

62-85

25-71

2-4

8-39

1-2

1-3

13³
184

27-40

16-41

Our markets in Western Europe

Markets

Denmark

Sweden

Norway

Finland

Poland

France

Switzerland

Germany

The Baltics

Italy

South East Europe

Portugal

¹ Sept. 2020 MAT. ² Breweries with capacity above 100,000 hl. ³ Including Marston’s. 4 Northern Germany. 5 Including
Wernesgrüner Brewery.

Source: Carlsberg estimates.

TOTAL VOLUME (m hl)

REVENUE (DKKbn)

OPERATING PROFIT (DKKbn)

OPERATING MARGIN

2017

2018

2019

2020

2017

2018

2019

2020

20%

18%

16%

14%

12%

10%

2017

2018

2019

2020

2017

2018

2019

2020

speciality performed particularly
well.

Despite the Swedish government
imposing less restrictive COVID-19
measures than most other
countries, the on-trade channel
was nevertheless negatively
impacted. Coupled with the decline
in the Norwegian border trade, our
volumes were down by high-single-
digit percentages.

FRANCE
In France, our business had a
challenging year, with volumes
declining by double-digit
percentages. The on-trade channel
was severely impacted by restrictions
and lockdowns in Q2 and Q4. In
addition, our brewery in Obernai
was unable to run at normal
capacity utilisation in H1 due to
COVID-19 constraints, negatively
impacting our promotional activities
in the off-trade and market share.
In H2, volumes and market shares
improved following a normalisation
of the supply chain and our
promotional activities.

SWITZERLAND
Our business in Switzerland saw solid
volume growth in the off-trade, but
as the business is skewed towards
the on-trade channel, total volumes
were severely impacted by the
lockdowns, declining by double-digit
percentages. The brand mix was

positive due to growth of local and
international craft & speciality
brands and alcohol-free beverages.

POLAND
In Poland, we delivered solid revenue
growth due to volume growth and
positive price/mix. Although the beer
market declined slightly, it was less
impacted by COVID-19 than most
other Western European markets
due to a relatively small on-trade
channel. Our craft & speciality, with
brands such as Somersby and
Zatecky, and alcohol-free brews,
especially within the flavoured
subcategory, did particularly well.

THE UK
In the UK, our off-trade volumes
grew. Due to the prolonged
lockdown of the on-trade, total
volumes declined by high-single-
digit percentages. In May, the Group
announced the acquisition of
Marston’s brewing activities in the
UK. The transaction was completed
at the end of October and the
integration is progressing well.

OTHER MARKETS
In Germany, our volumes were
flat for the year. In December,
we announced the acquisition
of Wernesgrüner Brewery, the
integration of which was concluded
already in January 2021.

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Markets such as Greece and Italy,
being highly dependent on the on-
trade and tourism, were severely
impacted by the pandemic.

Our Bulgarian business performed
well, growing volumes in a declining
market. The local power brand
Pirinsko and craft & speciality brands
such as Somersby and Zatecky Gus
saw strong growth.

ENGAGING
IN M&A

During the year, we strengthened our footprint
in Western Europe through the acquisitions of
Marston’s brewing activities in the UK,
Wernesgrüner Brewery in Germany and the
rights to the Brooklyn brand in all our markets
across our three regions. In the UK, the new
combined business, of which Carlsberg owns
60%, will significantly strengthen our business.
Carlsberg Marston’s Brewing Company has a
strong portfolio of international, national and
regional beer brands within lager and ale that
brings our customers a wider choice. The
business will also benefit from the extended
distribution to the Marston’s pub estate. In
addition, the merger will result in substantial
revenue and cost synergies.

STRENGTHEN THE CORE

ASIA

STRONG
PERFORMANCE

The impact of COVID-19
differed significantly between
our Asian markets. The
important Chinese market
recovered well during the year,
contributing to the solid
regional performance.

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. China is 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 premiumisation of our
local power brands. Consequently, a
significant proportion of our SAIL’22
investments is allocated to the
region.

REGIONAL RESULTS
The development in Asia varied
significantly between markets and
during the year. Our Chinese
business was severely impacted by
COVID-19 in Q1, but rebounded in
Q2. The other markets in the region
were impacted slightly later, with a
significant negative impact seen in
Q2. A few markets have since
experienced some degree of rebound,
though the situation towards the end
of the year remained challenging in
most markets.

Total volumes declined organically
by 5.9%, as the recovery in China
could not offset the market declines
elsewhere in the region.

Revenue/hl grew by 1%, curbing the
decline in organic revenue to 5.0%.
Revenue/hl was mainly impacted by

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Volume (million hl)

Beer

Non-beer

Total volume

DKK million

Revenue

Operating profit before special items

Operating margin (%)

2019

37.2

4.8

42.0

Organic

Acq., net

-6.7%

-0.2%

-5.9%

0.0%

Change

Reported

-6.7%

-0.2%

-5.9%

2020

34.8

4.8

39.6

18,416

3,931
21.3

-5.0%

5.0%

0.0%

-2.9%

-3.5%

16,959

3,991

23.5

-7.9%

1.5%

220bp

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Our markets in Asia

Markets

China

Laos

India

Vietnam

Cambodia

Malaysia

Nepal

Myanmar

Singapore

Hong Kong

Consumption characteristics

Our position

Per capita
beer
consumption
(litres)

On-trade
share
of market,
approx. (%)

Market
position (no.)

Market
share¹ (%)

5/1³
1

7/65³
95

Our
operations

Breweries²

¹ Sept. 2020 MAT. ² Breweries with capacity above 100,000 hl. ³ Total China/western China.
Source: Carlsberg estimates.

country and channel mix. Reported
revenue declined by 7.9% due to the
devaluation of most Asian currencies
against DKK.

The cost mitigation actions in Asia
were substantial and very successfully
executed. Consequently, operating
profit grew organically by 5.0% and
the operating margin improved
strongly, by 220bp to 23.5%.

Marketing investments as a
percentage of revenue for the full
year were slightly down year on
year, but with a significant difference
between H1 and H2. In H1, we
reduced marketing investments early
on to mitigate the COVID-19 impact,
while in H2 investments were back at
the level we believe is required to
sustain long-term sustainable
growth in our Asian business.

CHINA
Our Chinese business performed very
well in a highly volatile environment.
Following a very challenging Q1 in
which China was impacted by
COVID-19, the business rebounded
in Q2, and as a result our full-year
volumes grew modestly, while the
overall market declined.

The key drivers for the year were
expanded distribution of the Wusu
brand outside its home province,
solid growth of our premium brands
and continued big city growth.

Despite the negative channel mix
resulting from the change from
traditional off-trade to modern off-
trade, revenue/hl increased by high-
single-digit percentages due to
strong growth of premium brands,
and further enhanced in Q4 by
strong growth of the Wusu brand

TOTAL VOLUME (m hl)

REVENUE (DKKbn)

OPERATING PROFIT (DKKbn)

OPERATING MARGIN

25%

23%

21%

19%

17%

15%

2017

2018

2019

2020

2017

2018

2019

2020

2017

2018

2019

2020

2017

2018

2019

2020

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

outside its home province and the
change in discount accruals.

approximately 40% in India and
approximately 50% in Nepal.

VIETNAM, LAOS AND CAMBODIA
In a highly volatile Vietnamese
market impacted by the pandemic,
compounded by severe flooding in
the central part of the country – our
stronghold – in Q4, our volumes
declined by mid-single-digit
percentages. Our local power brand
Huda continued to perform well.

In Laos, our total volumes declined
slightly as growing soft drinks
volumes largely compensated for
lower beer and water volumes. The

The Material Asset Restructuring of
our Chinese assets was concluded in
December, following which most of
the Group’s Chinese assets and those
of Chongqing Brewery Company
(CBC) are now owned by Chongqing
Jianiang Brewery Co. (Jianiang).

Jianiang is owned 49% directly by
the Carlsberg Group and 51% by
CBC, the latter being listed on
the Shanghai Stock Exchange.
Carlsberg is the controlling
shareholder in CBC, owning 60%
of the shares. Consequently,
Carlsberg’s total economic
interest in Jianiang following the
restructuring is 79%.

INDIA AND NEPAL
2020 was a very challenging year
for our businesses in India and
Nepal, where the beer markets were
significantly impacted by
government lockdowns and
restrictions.

In both markets, our breweries were
forced to close during Q2 and
distribution was severely restricted
or even prohibited.

The situation improved slightly
in H2, but volumes remained
depressed. Consequently, full-year
volumes declined significantly, by

market was impacted by COVID-19
in H1, but recovered from May
onwards. Lack of tourists in the
country continues to impact the on-
trade sector.

Cambodia was impacted by
restrictions and a significant decline
in tourism. In addition, our beer
volumes declined, especially at the
beginning of the year. While we
continued our work on rebuilding the
business, the additional challenges
brought by COVID-19 led us to
revalue the Angkor brand, resulting
in an impairment charge. Volumes
grew in Q4, mainly driven by the soft

drinks business, in spite of new
COVID-19 outbreaks and restrictions
in December.

MALAYSIA AND SINGAPORE
Malaysia was negatively impacted
by restrictions related to the on-
trade, distribution and production,
the last of these leading to a
closure of our brewery in Q2.

In Singapore, our volumes declined
modestly while a change in channel
mix, due to on-trade restrictions,
impacted price/mix negatively.

TUBORG IN CHINA

Since its launch in 2012, Tuborg has
been on a remarkable journey in
China. Targeting young adult
Chinese consumers, the brand has
successfully positioned itself as the
favourite beer for high-energy
social explorers, and today Tuborg
is the second largest international
beer brand in China. With sales
skewed to the on-trade, our big city
expansion has been an important

growth driver in recent years, with
around half of brand volumes now
sold outside our stronghold in
western China. To ensure the
continued relevance of the brand, we
launched Tuborg White in 2019 and
Tuborg Pure Draft in 2020. From
2015 to 2019, Tuborg delivered
strong growth of around 10% CAGR,
while in 2020 volumes were flat due
to the challenges of COVID-19.

GROW IN ASIA

EASTERN EUROPE

SUCCESSFUL
BUSINESS RESET

The Eastern Europe region
was less impacted by COVID-
19 due to low on-trade
exposure. Responding to the
promotional pressure in
Russia, we successfully grew
volumes and strengthened our
market share.

Eastern Europe is our smallest
region, accounting for around one-
fifth of operating profit. Our two
main markets in the region are
Russia and Ukraine, accounting for
67% and 20% respectively of regional
volumes.

We have no. 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.

In light of the relatively small size of
the region, from 1 January 2021 the
region has been expanded to include
some of the former Western Europe
markets and our export and licence
business, changing its name to

Central & Eastern Europe. See page
9.

REGIONAL RESULTS
In Eastern Europe, the impact of
COVID-19 was relatively modest due
to low on-trade exposure. However,
particularly towards the end of the
year, markets were negatively
impacted by a change in channel,
customer and product mix as a result
of weakening consumer confidence.

All markets, with the exception of
Ukraine, delivered total volume
growth for the year. For the region,
beer volumes grew organically by
5.3%. Non-beer volumes grew
strongly by 22.6%, mainly due to
growth of energy drinks across the

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Volume (million hl)

Beer

Non-beer

Total volume

DKK million

Revenue

Operating profit before special items

Operating margin (%)

2019

29.2

1.8

31.0

Organic

Acq., net

5.3%

22.6%

6.2%

0.0%

Change

Reported

5.3%

22.6%

6.2%

2020

30.7

2.2

32.9

11,097

1,882
17.0

1.0%

10.9%

0.0%

-10.8%

-9.0%

10,010

1,917

19.2

-9.8%

1.9%

220bp

region. Total volumes were up
organically by 6.2%.

activities in Russia to regain some of
the market share lost in recent years.

Revenue grew organically by 1.0%.
Revenue/hl of -5% was impacted by
the higher level of promotional

The region delivered strong organic
operating profit growth of 10.9%,
driven by strong performance in all

markets outside Russia. The
operating margin increased by
220bp to 19.2%. We achieved
significant cost savings across the
region. Combined with a favourable
development in costs of goods sold,

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. (%)

Market
position (no.)

Market
share¹ (%)

Breweries²

¹ Sept. 2020 MAT. ² Breweries with capacity above 100,000 hl.

Source: Carlsberg estimates.

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

we were able to more than offset the
impact of the high level of
promotional investments in Russia.

level of promotions and a negative
channel and packaging mix.

RUSSIA
The Russian beer market grew
slightly in 2020 despite COVID-19,
due to a relatively small on-trade
channel and supported by very
favourable weather during the
summer.

The competitive environment
remained challenging. t the end of
Q1, we kicked off our changed
commercial priorities with the aim of
turning around the volume trajectory
and restoring our market share.

For the year, volumes grew by 9%.
Revenue/hl declined by high-single-
digit percentages due to the higher

UKRAINE
In Ukraine, our volumes declined
slightly, largely in line with the
market. Revenue/hl developed
negatively, mainly due to channel
and brand mix, and a higher level of
promotions. Our local mainstream
brands, 1664 Blanc and alcohol-free
brews did well, while Carlsberg and
Tuborg were impacted by the
restrictions imposed on the on-trade.

OTHER MARKETS
The other markets in the region –
Kazakhstan, Belarus and Azerbaijan
– delivered double-digit revenue
growth driven by solid volume
growth and improved revenue/hl due
to price increases and growth of craft
& speciality and alcohol-free brews.

TOTAL VOLUME (m hl)

REVENUE (DKKbn)

OPERATING PROFIT (DKKbn)

OPERATING MARGIN

2017

2018

2019

2020

2017

2018

2019

2020

2.5

2.0

1.5

1.0

0.5

0.0

25%

20%

15%

10%

2017

2018

2019

2020

2017

2018

2019

2020

CAPITAL ALLOCATION

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

OPTIMAL CAPITAL ALLOCATION
AND VALUE-ENHANCING ACQUISITIONS

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 if
value-enhancing acquisition
opportunities arise.

DELIVERING ON CAPITAL
ALLOCATION PRINCIPLES
Despite the headwind posed by
COVID-19, we delivered on these
priorities again in 2020.

DRIVING LONG-TERM GROWTH
Responding to the impact of COVID-
19 on revenue, significant changes
were implemented to safeguard the
financial health of our company, both
in terms of protecting the year’s
results and cash, and ensuring that
we will be able to capture long-term
growth opportunities.

Consequently, we continued to
support and invest in our brands and
activities. Examples include the launch
of Tuborg line extensions in China
(see page 23) and the launch of a
new global communication platform
for 1664 Blanc (see page 14).

LEVERAGE
Due to our efforts to protect operating
profit and cash in 2020, net interest-
bearing debt to EBITDA at the end of
the year was 1.51.

This leverage was achieved even
though we carried out share buy-
backs, in total amounting to DKK
2.9bn, and completed several M&A
transactions during the year.

DIVIDEND PAYOUT
In March, we paid out a dividend of
DKK 21 per share, equal to a 17%
increase on the previous year. In total,
the dividend amounted to DKK 3.1bn,
corresponding to an adjusted payout
ratio of approximately 50%, in line
with our dividend policy.

As a result of the continued low
financial leverage, at the Annual
General Meeting in March the
Supervisory Board will propose an
increase in dividend of 5% to DKK 22
per share. This corresponds to an
adjusted payout ratio of 50%.

SHARE BUY-BACK IN 2020
From February to August, the
Group carried out a share buy-back
programme amounting to DKK
2.5bn, following the announcement
on 4 February 2020 outlining the
intention to buy back shares worth
DKK 5bn over a 12-month period.
The buy-back programme was to be
split into two tranches of around six
months each.

Under the first tranche, the Group
bought 2,897,021 shares at an

average repurchase price of DKK 863
per share, in total DKK 2.5bn.

Due to M&A activities and the
continued uncertainty related to
COVID-19, the second DKK 2.5bn
tranche of the buy-back was not
initiated.

Combined with the share buy-back
in January 2020 related to the 2019
share buy-back programme,
3,290,522 B shares were repurchased
in fiscal 2020 at a total purchase
price of DKK 2.9bn.

At the Annual General Meeting on
15 March 2021, the Supervisory
Board will recommend that
2,900,000 treasury shares not used
for hedging of incentive programmes
be cancelled.

SHARE BUY-BACK IN 2021
Due to the continued business
uncertainty related to the COVID-19
pandemic, especially at the beginning
of 2021, the Group intends to
execute the 2021 share buy-back
programme quarter by quarter.

Consequently, from 5 February until
23 April, the Group intends to buy
back Carlsberg B shares amounting
to DKK 750m. On 28 April, in
connection with the Q1 trading
statement, we will provide
information on the next quarterly
share buy-back in 2021.

More information regarding the share
buy-back can be found in the 2020
financial statement announcement of
5 February 2021.

VALUE-ENHANCING M&A
In addition to the share buy-back, we
also engaged in M&A transactions
during the year, amounting to DKK
3.2bn in total.

In June, we acquired the rights to
the Brooklyn brand in our markets.
In October, we completed the
acquisition of Marston’s brewing
activities in the UK (see section 5.2
in the consolidated financial
statements), and in Germany we
acquired Wernesgrüner Brewery.
In China, we merged our Chinese
businesses, see page 22.

Review and expectations

2021 EARNINGS EXPECTATIONS

EARNINGS
EXPECTATIONS

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS

Accordingly, forward-looking
statements should not be relied on as
a prediction of actual results. Please
see page 52 for the full forward-
looking statements notice.

In most markets, the COVID-
19 pandemic continues to
impact business performance,
which means a challenging
start to 2021.

The uncertainty related to the extent
and length of the pandemic, further
government actions, consumer
reactions and macroeconomic
developments remains high and may
have significant implications for
business performance. As a result,
2021 guidance is:

• Organic growth in operating profit
within the range of 3% to 10%.

The earnings outlook is based on the
following assumptions related to
COVID-19:

• In Western Europe, the on-trade
channel will likely be impacted by
restrictions well into Q2, with a
gradual recovery of the on-trade
during the quarter. We are
assuming that most restrictions will
be lifted before the summer
season.

• In Asia, the impact of COVID-19
varies by market. The Chinese
market is assumed to be back to its
normal trajectory, though with
some local disruptions, including
during the Chinese New Year
celebrations. In other markets, such
as India and Nepal, the situation
remains very difficult and highly
volatile, though in most markets
we are assuming a slow recovery
during H1, driven by a gradual
lifting of restrictions.

• In Central & Eastern Europe , the

markets in the southern part of the
region, which have relatively higher
on-trade exposure, will likely
continue to be impacted by
restrictions well into Q2, though we
are assuming that most restrictions
will be lifted before the summer
season. In Russia, the on-trade
channel is relatively small.
However, consumer sentiment is
increasingly being impacted by the
consequences of the pandemic, and
the competitive environment
remains fierce.

Based on the spot rates at 4
February, we assume a translation
impact of around DKK -200m for
2021.

Other relevant assumptions are:
• Financial expenses, excluding
currency losses or gains, are
expected to be around DKK 600m.

• The reported effective tax rate is

expected to be around 25%.
• Capital expenditure at constant

currencies is expected to be DKK
4.0-4.5bn.

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.

This is particularly relevant in 2021,
due to the very high uncertainty
related to the continuing
development and impact of COVID-
19.

Strategic review

PURPOSE AND AMBITION

BREWING FOR A BETTER
TODAY AND TOMORROW

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

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 in 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.

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.

Our purpose demonstrated its value
during the challenges of COVID-19.
It was impressive to witness the high
level of employee engagement and
the innovative mindset at all levels of

the organisation to help local
communities, support our customers
and minimise the impact of the
pandemic on our business, while at
the same time finding flexible and
safe ways of working.

We will continue to live our
purpose, as it is key for the
successful execution of our strategy
and achieving our ambition of being
successful, professional and
attractive in our markets:

Successful in achieving a
sustainable balance of the Golden
Triangle by improving long-term
volumes, margins and earnings.

Professional in being the preferred
supplier for our customers.

Attractive in creating value for our
shareholders, facilitating a great
working environment and high-
performance culture for our
employees, and being a responsible
and sustainable corporate citizen for
society at large.

BUSINESS MODEL

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

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 OCCASIONS...

… 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 online to offline. We aim to
become their preferred beer supplier, providing
products and services that deliver value
growth for them and us.

Our integrated supply chain focuses on
optimising cost and asset utilisation and
mastering cross-functional processes, while
brewing high-quality beer and enabling our
commercial growth agenda.

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 develop digital solutions and services to help
our customers grow their business. We engage in
developing sustainable packaging solutions and
launching initiatives to increase collection and
recycling rates.

BREWING FOR A BETTER
TODAY AND TOMORROW
Recognising the need for strong actions in
the face of complex sustainability challenges,
Together Towards ZERO sets clear and
ambitious targets for carbon emissions, water
usage and health & safety.

OUR STRATEGY

SHARPENED
STRATEGIC FOCUS

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

While COVID-19 had a
significant impact on our
business in 2020, our SAIL’22
strategy proved resilient
during the pandemic.

We introduced our seven-year
strategy – SAIL’22 – in 2016.

The key elements of SAIL’22 are
shown below.

The strategic priorities are further
outlined in the 2016 Annual Report,
available online at
www.carlsberggroup.com.

into the SAIL’22 period, we continue
to see many opportunities within the
framework, and we fully expect to
keep our strategy for all seven years.

STRATEGY REMAINS
COVID-19 was a stress-test for
SAIL’22 and our strategic priorities,
which proved resilient during a very
challenging year. Notwithstanding
the fact that we are now five years

SHARPENING FOCUS
Each year, specific opportunities and
plans evolve. In addition, COVID-19
made new emphases appropriate.
While staying in line with our
strategic priorities, we will further

sharpen our focus on key brand,
category and channel priorities,
aspire to even better in-market
execution, maintain even tighter
control of costs, and develop even
more flexibility in our ability to plan
and amend plans.

This will require us to continuously
evolve the way we best achieve our

winning, team-based performance
culture.

On the following pages, we provide
further detail on the role and impact
of our strategic priorities in 2020.

STRENGTHEN
THE CORE

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

The importance of strong
market positions, local power
brands, execution capabilities
and, in particular, our ability to
control costs became evident
in 2020.

CHANGES IN CONSUMER
BEHAVIOUR…
Across our markets, COVID-19 drove
changes in consumer behaviour, with
increased demand in the off-trade
for more mainstream brands and
multipack offerings at the early
stages of the pandemic, changing
towards a pick-up of demand for
more premium offerings later on.
In addition, online shopping saw
significant growth rates.

… EMPHASISED THE IMPORTANCE
OF OUR CORE BUSINESS
Our focus on strengthening our
core business was amplified by the
pandemic, as seen by the strength
of our local power brands, our
improved digital capabilities and,
in particular, our well-embedded
Funding the Journey culture with
its relentless focus on costs and
efficiency.

STRENGTHEN THE CORE

LEVERAGE OUR STRONGHOLDS

LEVERAGING LOCAL
POWER BRANDS

GROWING
IN RUSSIA

Our local power brands are an important part of
our business. These brands have long histories
and deep roots in their local markets. Aside
from seeing increased interest from consumers
looking for more authenticity, we premiumise
the local power brands by launching “crafty”
line extensions and alcohol-free variants. While
results in 2020 were impacted by COVID-19,
the resilience of these brands was evidenced by
growth brands such as Frydenlund (Norway),
Astra (Germany), Pirinsko (Bulgaria), Dali and
Wusu (China), Baltika and Zatecky Gus (Russia)
and Derbes (Kazakhstan).

2020 was a strong year for our
Russian business in terms of volumes
and market share. In response to high
competition pressure in the market, we
took significant promotional actions to
protect our volumes and improve our
market share. At the same time, we
pursued the SAIL’22 growth priorities
of craft & speciality and alcohol-free
brews and stepped up our commercial
capabilities, resulting in volume growth
of 9%.

FUNDING THE JOURNEY CULTURE

OCM AND CASH
MANAGEMENT

Our Funding the Journey culture, with its focus
on costs and cash, played a key role in 2020. As
part of this, we have in recent years successfully
implemented our Operating Cost Management
(OCM) toolkit across the Group, improving our
cost planning, increasing transparency and
enabling detailed follow-up on operating costs.
We began taking actions to offset the negative
top-line impact of COVID-19 when the virus hit
China very early in 2020. When the disease turned
into a pandemic, we intensified our cost reduction
actions, successfully leveraging our OCM toolkit,
which played a key role in reducing the negative
impact on earnings. See pages 13 and 15.

EXCEL IN EXECUTION

EXPANDING DIGITAL

COVID-19 drove a rapid acceleration of
e-commerce and digital platforms. Albeit still from
a low base, third-party e-commerce sales were up
by around 60%, mainly driven by Asia. Carl’s Shop
– our B2B e-commerce platform – also showed
very good results. The ability to use advanced
analytics to tailor the most relevant experience for
each on-trade customer helped to grow value per
order and strengthen customer loyalty.

POSITION
FOR GROWTH

GROWING CRAFT & SPECIALITY
AND ALCOHOL-FREE BREWS

DRAUGHTMASTER
DRIVING
PREMIUMISATION

The roll-out of DraughtMaster across Western
Europe continued and was almost completed
in the Nordics, while trials were initiated in
Asia. In 2020, we improved the equipment
with a digital layer, delivering unique real-
time consumption data. While volumes
were impacted by COVID-19 restrictions,
these actually served to further highlight
the customer advantages of DraughtMaster,
with less beer expiring thanks to the 31-day
keg life and faster re-opening thanks to the
self-cleaning system. DraughtMaster outlets
also benefited from a better mix of C&S
compared with outlets with traditional steel
keg installations.

Although growth was
hampered by COVID-19, we
continued to support the
growth priorities of SAIL’22.

RESILIENT PERFORMANCE FOR
OUR GROWTH CATEGORIES…
On-trade is an important channel
for the craft & speciality (C&S)
category. Despite the severe impact
of government restrictions, our C&S
portfolio grew by 1%. Our alcohol-
free brews (AFB) grew by 11%, with
continued growth in Western and
Eastern Europe, while the category
remained small in Asia. AFB
benefited from increasing consumer
awareness of health and wellbeing,
further amplified by COVID-19.

… WHILE MANY MARKETS IN
ASIA WERE UNDER PRESSURE
All markets in Asia were impacted
by COVID-19, albeit at different
speeds and magnitudes. Following
a difficult Q1, we saw strong
performance in China, and we
remain confident that the region
will rebound once the pandemic has
been contained.

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

WIN IN ALCOHOL-FREE BREWS

GROW CRAFT & SPECIALITY

GROWING
ALCOHOL-FREE BREWS

INVESTING
IN BROOKLYN

Our alcohol-free brews are wide-ranging,
including lagers, IPAs and wheat beers.
We are targeting new as well as already
penetrated consumer occasions, leveraging
our core beer and C&S brands to drive
growth for our alcohol-free volumes.
Poland is a good example of this strategy,
with Somersby, Zatecky and Okocim
alcohol-free variants all driving local AFB
volume growth of 42% in 2020.

Our cooperation with Brooklyn dates
back to 2004, when we began importing
the brand to Denmark. Since then, we have
developed a close cooperation with this great
New York craft brewer. In 2020, we further
strengthened the collaboration when we
acquired the rights to the Brooklyn brand in
our markets. The deal will reduce complexity
and increase profitability, supporting future
growth of the brand.

CREATE A
WINNING CULTURE

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

2020 was a defining year for
our winning culture, passing
the test during the immense
challenges of the COVID-19
pandemic.

Our Sustainability Report contains
extensive reporting on our winning
culture. It describes our approach
and performance in relation to our
most material social, environmental
and ethical issues, including progress
against the four ambitions of our
sustainability programme, Together
Towards ZERO. The report also
elaborates on how we Live by our
Compass and conduct our business
responsibly, and how we support
and develop our team-based
performance culture.

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 disclosure in accordance with
section 99a of the Danish Financial
Statements Act.

TOGETHER TOWARDS ZERO

PROMOTING
SUSTAINABLE
AGRICULTURE

Our business depends on a long-term,
sustainable supply of crops, mainly barley
and rice. We invest in next-generation
crops through the work of scientists at
the Carlsberg Research Laboratory. Their
ground-breaking efforts include developing
high-yielding barley varieties with
additional sustainable process benefits,
accounting for significant CO2 savings
when fully implemented.

Novel climate-tolerant varieties are also
being developed that offer improved heat
tolerance, salinity tolerance and drought
resistance. Several promising genetic
variants are currently being evaluated
in drought trials in Australia and Russia,
where we are seeing more than 10% higher
yield levels with limited water supply.
A specific focus has also been obtaining
barley varieties targeting the very fertile
soils in Russia, resulting in malting barley
varieties with extract levels 1-2 percentage
points higher than those of standard
elite varieties.

TEAM-BASED PERFORMANCE

LIVE BY OUR COMPASS

ENGAGING WITH
EMPLOYEES

ZERO TOLERANCE
TO HARASSMENT

The flexibility, agility and ability of our
people to quickly adjust to the new reality
that affected all areas of our business is a
testimony to the embedding of our team-
based, performance-driven culture across
all our markets and functions. During the
year, our focus was on the physical safety
and mental wellbeing of colleagues, and we
conducted local pulse surveys to check on
employee wellbeing and enable local leaders
to respond to COVID-19 challenges and
better support their teams.

Everyone must be treated with respect in
our workplace and we have a zero tolerance
approach to bullying, abuse, threats or any form
of harassment, whether it be physical, verbal,
sexual or psychological. Our Code of Ethics &
Conduct protects this value and clearly states
the consequences if anyone breaks the rules.
We support and encourage anyone who may
have experienced harassment to talk to their
manager, their manager’s manager or their local
HR team – or to report it via our confidential
Speak Up line – so we can take action.

LIVE BY OUR COMPASS

TARGETING BRIBERY
AND CORRUPTION

We consider any form of bribery to be
dishonest, morally wrong and unacceptable.
Our Anti-Bribery and Corruption Policy and
manuals spell out our zero-tolerance approach
and guide employees on what constitutes a
bribe and how to deal with specific situations.
In 2020, we introduced new online training on
anti-bribery and corruption for people in roles
such as sales, procurement and finance. Over
19,100 employees completed the course, which
includes real-life examples, experiences and
dilemmas.

TOGETHER TOWARDS ZERO

REDUCING WATER WASTE

Our dedicated team at the Dazhulin brewery in
China has made it its mission to dramatically
reduce water waste. Applying best practices
from across the Group, it reduced the amount
of water used to produce a hectolitre of beer
by 18% – from 2.7 to 2.2 hl/hl – in just four
months. This brings the brewery close to
achieving our 2022 target to explore going
below 2.0 hl/hl at sites with high water risk.
Saving water also means saving energy, and
combined with a move to 100% renewable
electricity, the efficiencies almost halved the
brewery’s carbon emissions.

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

TOGETHER
TOWARDS ZERO

ZERO CARBON FOOTPRINT
Our ambitious carbon targets, approved by the Science-Based
Targets Initiative, are in line with the latest climate science to limit
global warming to 1.5°C. In 2020, we reduced relative brewery carbon
emissions by 12%. Since 2015, our relative brewery carbon emissions
are down by 39% while our full relative value chain (beer-in-hand)
emissions have been reduced by 7%.

ZERO WATER WASTE
Water is an essential ingredient in our products, and other key
ingredients like grains and hops need it to grow. At 2.8 hl/hl in 2020,
we have made a 18% improvement in water efficiency from our 2015
baseline. We assessed water risk across 81 of our breweries using
WWF's leading Water Risk Filter tool and also used its scenario
analysis tool to understand our global water risk in a changing climate.

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. All our beers and ciders carry messages or icons
advising consumers not to drink-drive and not to drink when underage
or pregnant. In 2020, ingredients were listed on 99% of our packaging
globally, while nutritional information was provided on 67%.

ZERO ACCIDENTS CULTURE
The health and safety of our people always come first, and we
believe all accidents are preventable. We manage key risks through
our health and safety management systems, stringent standards,
training and compliance with our Life Saving Rules. In 2020, the
lost-time accident rate declined to 3.0 from 3.7 in 2019. However,
we deeply regret the death of a contract worker in Russia.

MEASURING OUR PROGRESS

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

STRENGTHEN THE CORE AND
POSITION FOR GROWTH

DELIVER VALUE
FOR SHAREHOLDERS

GROSS BRAND CONTRIBUTION FROM CORE BEER

ORGANIC GROWTH IN OPERATING PROFIT

2018: +6%
2019: +3%
2020: -7%

2018: +26%
2019: +16%
2020: +1%

2018: +15%
2019: +7%
2020: +11%

2018: +15.8%
2019: +23.4%
2020: +5.0%

Core beer accounts for 82% 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. Impacted by COVID-19, growth
in recent years was not repeated in 2020, declining by 7%.

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. The strength of our brands became clear in 2020,
when our craft & speciality portfolio volumes grew by 1% despite the
negative impact on the important on-trade channel from COVID-19.

WIN IN ALCOHOL-FREE BREWS

Alcohol-free brews continued to grow in Western and Eastern Europe,
further supported in 2020 by increased consumer health awareness due to
COVID-19. Our attractive portfolio of alcohol-free brews leverages the
well-established market position of our local power brands. In 2020,
total volume growth of our alcohol-free brews was 11%, with growth of
16% in Western Europe and 14% in Eastern Europe.

GROW IN ASIA

In 2020, Asia accounted for 31% of Group volumes and 36% of operating
profit. Growing in Asia, and particularly China, is a priority of SAIL’22.
China recovered impressively from COVID-19, as did Laos, while
markets such as India, Nepal and Malaysia suffered throughout the
year. We saw strong growth for 1664 Blanc, while Tuborg was
impacted by the severe market decline in India. Operating profit grew
organically by 5.0%. Read more about our results in Asia on pages 21-
23.

We aim to deliver organic growth in operating profit by
delivering top-line growth and margin improvement. In 2020,
COVID-19-related lockdowns and restrictions prevented us
from continuing the organic growth trajectory of recent years.
Our relentless focus on costs and early intervention enabled us
to partly offset the top-line decline, containing the organic
operating profit decline to 3.1%.

2018: +11.0%
2019: +10.5%
2020: -3.1%

ROIC IMPROVEMENT

We aim to continuously improve return on invested capital
(ROIC) by improving earnings and reducing invested capital. In
2020, ROIC improved by 10bp to 8.9%, mainly driven by the
lower effective tax rate and supported by lower capital
employed. The latter was positively impacted by trade working
capital, a lower CapEx/depreciation ratio and currencies.
Excluding goodwill, ROIC increased by 80bp to 23.2%.

2018: +120bp
2019: +70bp
2020: +10bp

2018: 1.29x/2.4bn
2019: 1.25x/6.8bn
2020: 1.51x/6.0bn

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 2020, NIBD/EBITDA was 1.51x. In 2020, the
dividend per share was DKK 21. For 2020, the proposed
dividend per share is DKK 22, equal to an adjusted payout ratio
of 50%. In addition, in 2020 we carried out share buy-backs
amounting to DKK 2.9bn in total. Total cash return to
shareholders in fiscal 2020 was DKK 6.0bn. Read more about
our capital allocation principles and share buy-backs on page 26.

ADDRESSING CLIMATE RISKS

CLIMATE-
RELATED RISKS

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

Climate change is already
affecting our operations and
markets. Across our regions,
we see its impact through land
degradation, spells of hot, dry
weather, and intense rainfall.

We are working to understand the
related risks and opportunities, and to
mitigate impact on our business.

Our annual Sustainability Report
details our approach and performance
against the ambitious targets of
Together Towards ZERO, and our
actions to live up to the ambitious
targets of the Paris Agreement on
Climate Change to limit the increase
in global average temperature to a
maximum of 1.5°C.

In 2020, we broadened the scope of
our climate-related reporting by
embracing the recommendations of
the Task Force on Climate-related
Financial Disclosures (TCFD). In the
table, we outline the relevant sections
for TCFD reporting in this Annual
Report and in our Sustainability and
Remuneration Reports.

Task Force on Climate-related Financial Disclosures (TCFD) reporting recommendations

Recommendation

Our disclosure in brief

Learn more

Governance

Disclose the organisation's
governance around climate-
related risks and opportunities.

The Supervisory Board has ultimate responsibility for risk management, including climate-related risks.
As part of the ongoing review of SAIL'22, the Supervisory Board reviews Together Towards ZERO,
including progress towards our sustainability targets.
The Executive Committee (ExCom) is responsible for sustainability, including climate change, with the
CEO assuming ultimate responsibility. ExCom approves policies and targets for the entire organisation
and monitors performance on a quarterly basis.
Sustainability measures, including the reduction of carbon and water use, are included in the short-term
incentive scheme for the CEO, CFO and other ExCom members.

• Risk management framework,

page 37.

• Overview of Supervisory Board
and Audit Committee work and
responsibilities, pages 42-44.
• Sustainability Report, description
of governance, pages 52-53.

• Remuneration Report, pages 6-7.

Strategy
Disclose the actual and potential
impacts of climate-related risks
and opportunities on the
organisation's businesses,
strategy and financial planning,
where such information is
material.

Risks
Disclose how the organisation
identifies, assesses and manages
climate-related risks.

Together Towards ZERO is an integrated part of our SAIL’22 strategy. It was developed in partnership
with global experts using a science-based approach and has emission reduction targets that align with
the ambitious goal of the Paris Agreement of a global temperature increase of maximum 1.5°C.
Together Towards ZERO’s focus areas and targets are based on a sustainability materiality assessment,
updated in 2020, to ensure focus across our business on the most relevant sustainability management
topics, risks and opportunities, including carbon emissions and water consumption.

From 2021, mid- and long-term risks, including climate-related risks and opportunities, will be
reviewed annually at Group level.
Every three years, and most recently in 2020, we carried out a materiality assessment to identify the most
important sustainability management topics, risks and impacts. In 2020, climate change was among the
highest-ranking issues for us to address.
Working with WWF, we used the Water Risk Filter scenarios to understand how water risks across our
breweries may evolve by 2030 and 2050 and identify priority sites for investments and community
partnerships.
We also updated our assessment of our beer-in-hand value chain footprint (Scope 1, 2 and 3
emissions) to measure our progress from the 2015 baseline and identify where to focus our efforts.

• SAIL’22, Together Towards ZERO,

pages 6 and 34.

• Sustainability Report, carbon and
water sections, pages 10-19 and
20-26.

• Sustainability Report, materiality

assessment, page 57.

• Risk management framework,

page 37.

• Sustainability Report, carbon and
water sections, pages 10-19 and
20-26.

• Sustainability Report, materiality

assessment, page 57.

Metrics and targets
Disclose the metrics and targets
used to assess and manage
relevant climate-related risks
and opportunities, where such
information is material.

Our annual Sustainability Report discloses our approach, 2022 and 2030 targets, key performance
indicators and performance in line with our Together Towards ZERO programme, the UN Sustainable
Development Goals and the UN Global Compact.
We disclose a comprehensive set of five-year comparable quantitative data for energy, carbon,
including Scope 1, 2 and 3 emissions (full Scope 3 data collected every three years), and water.
We have also disclosed detailed information to CDP on our greenhouse gas emissions and approach to
climate change management since 2007.

• Sustainability Report, data

summary table, pages 67-73.

• Sustainability Report, SDG actions,

pages 59-65.

MANAGING RISKS

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.

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 are in place for managing
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.

SHORT-TERM RISK ASSESSMENT
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.

Local and functional risk assessment
follows the same principles and
methodology as Group-level risk
assessment.

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.

MID- AND LONG-TERM RISK
ASSESSMENT
A review of mid- and long-term
risks is conducted annually at Group
level.

Based on input from various central
functions, including finance, legal,
sustainability, human resources and
investor relations, and regional
teams, the Group strategy team
identifies risks within the areas of
commercial & competition,
governance, consumer,
macroeconomic and geopolitical
environment, reputation, supply
chain and climate.

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

IDENTIFIED
RISKS FOR 2021

RISKS WITH HIGHEST POTENTIAL
IMPACT AND LIKELIHOOD
• Impact from COVID-19
• Economic instability/recession
• Partnerships
• Legal and regulatory compliance
• Cyber and IT security
• Tax

OTHER IDENTIFIED RISKS
• Regulatory changes, incl. duties
• Financial flexibility
• Strategy execution
• Western Europe operating model
• Business interruption

For climate-related risks, in 2020 we
initiated the process of TCFD
reporting, see page 36.

Group’s risk exposure, applying our
two-dimensional heat map
methodology, and determine
appropriate actions.

Based on this risk identification,
ExCom will evaluate and assess the

RISKS IDENTIFIED FOR 2021
The identified risks for 2021 are
shown in the box on the previous
page.

Based on the heat map assessment,
the six highest ranked risks are
elaborated in the following, including
in each case a description of the risk
and associated mitigation efforts.

The risk movement paragraph
indicates whether the likelihood of
risk has increased or decreased, or
remains unchanged, versus last year.

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

IMPACT FROM COVID-19
Risk movement
New.

demand and supply-chain
circumstances.

Description
COVID-19 continues to affect our
people and our business. While
government interventions vary by
geography, lockdowns and other
restrictive measures affect off-take
in both the on-trade and off-trade
channels. Further, supply chains may
be impacted by raw material
shortages and the ability to brew
and distribute our products.
Depending on geography and go-
to-market models, our markets may
therefore be impacted in terms of
volume, mix, margin and cash flow
performance.

Despite the distribution of vaccines,
we therefore anticipate a prolonged
impact in 2021 from COVID-19.

Further, we will continue our
scenario planning for the mid term,
pre-empting multiple possible
outcomes in terms of business
impact.

Based on the scenario planning, we
will continue to protect our operating
profit and cash position, leveraging
Funding the Journey, including our
Operating Cost Management (OCM)
toolkit. Read more about our cost
mitigation actions in 2020 on pages
13 and 15.

Our actions and activities will
continue to be tailored to local
markets to ensure an appropriate
response to country-specific
challenges and situations.

Mitigation
Our first priority will remain the
health and safety of our employees.

MACROECONOMIC UNCERTAINTY/
RECESSION
Risk movement
Increase versus last year.

In 2021, our operating plan is based
on our SAIL’22 priorities. In addition,
we will continue to apply the
learnings and ways of working from
2020. These include more frequent
planning cycles, utilising our sales
and operation planning (S&OP)
practices to enable fast adaptation
and response to changing market

Description
In continuation of the COVID-19 risk,
the pandemic has led to increased
macroeconomic uncertainty.

Although the consequences for our
business may be more longer-term,
we must prepare now for this greater
uncertainty.

Mitigation
Due to the current market volatility,
our planning is more short-term and
highly flexible to allow appropriate
actions within a short time horizon.

When the pandemic is under control,
we will again become more longer
term and reinstate our more
thorough three-year planning cycle
with its quarterly reviews and
updates, while continuing to embed
the positive learnings of COVID-19
and benefiting from the actions
taken to reset our business and
reduce costs (see pages 13-14).

PARTNERSHIPS
Risk movement
Decrease versus last year.

Description
We cooperate with partners in some
markets in Western Europe and Asia,
and we also have 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.

Our partners’ potential 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 in order to ensure their
continued success.

We seek to have an ongoing
dialogue with our partners to
identify 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
Risk movement
Unchanged versus last year.

Description
Legal and regulatory compliance
risks include competition law and
data protection compliance (GDPR),
as well as non-compliance with
anti-bribery & corruption regulations
and trade sanctions. Failure to
comply with regulations and Group

CARLSBERG GROUP ANNUAL REPORT 2020 STRATEGIC REVIEW

quality for VAT and product
classification for excise duties.

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 continuously strengthen the
Group-wide control framework
covering legal compliance areas,
including, but not limited to,
competition law, anti-bribery &
corruption, trade sanctions and data
protection.

requirements. Employees are
required to complete these e-
learning modules on an ongoing
basis in order to further create
awareness of relevant risks and how
to mitigate them.

In 2021, we will review, simplify and
rationalise the suite of compliance
policies, manuals, guidance etc. to
facilitate greater understanding and
awareness by the wider business of
the behaviour expected of all
employees to reduce compliance
risk. In addition, we will further
enhance the compliance control
framework.

Read more about our compliance
efforts in the Responsible Business
section of the Sustainability Report.

We regularly review and update
relevant Group legal and compliance
policies, and conduct compulsory
training of all relevant employees.

CYBER AND IT SECURITY
Risk movement
Unchanged versus last year.

We actively set a strong tone from
the top and have developed toolkits
to help managers in all markets to
understand their role in shaping
ethical behaviour every day.

We have stepped up our training
approach and updated our e-
learning modules in the areas of
anti-bribery & corruption,
competition law and data protection,
the latter to reflect GDPR

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,
regulatory and reputational
consequences for our business.

Mitigation
Our IT security organisation has
regular dialogue with the Supervisory

Board and ExCom to agree on risk
mitigation plans and activities.

As the cyber security threat
assessment has intensified in recent
years, we have strengthened our
protective work to counter the risk.

To further progress our protection
against cyber security threats, a
Chief Information Security Officer
was appointed to lead an
independent cyber security function
within our IT organisation.

Furthermore, we are developing and
deploying a wide array of advanced
defensive technologies, as well as
continuing to embed our risk
management framework at all layers
of the organisation.

We undertake regular testing of our
security controls via an ongoing
series of technological audits and
breach simulations.

TAX
Risk movement
Unchanged versus last year.

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 increasing focus on corporate
tax payments may increase the risk
of tax audits, which could lead to
reassessments of taxable income.

In addition, changes in the legal and
regulatory environment, as well as
internal structures, may increase the
risk of non-compliance with local
and global tax laws and regulations.

Mitigation
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.

In 2020, we updated our Tax Policy
to align with best practice and ensure
common understanding across the
Group. The Tax Policy is approved by
the Supervisory Board, while the
Executive Committee exercises
oversight of the tax affairs in the
Group.

We are continuously strengthening
our tax control framework and
improving reporting transparency.
This includes documentation of
inter-company transactions to
ensure compliance with tax
legislation and improving data

Governance

CORPORATE GOVERNANCE

FOCUS ON
CORPORATE GOVERNANCE

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

Our governance framework
aims to ensure value creation,
safeguard active and
transparent stewardship 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,
labour & human rights, diversity &
inclusion, competition law, trade
sanctions, data protection, risk
management, finance, marketing,

Download our policies

www.carlsberggroup.com/sustainability/
download/download-our-policies

corporate communication,
responsible drinking and public &
government affairs.

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 three
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 as a

result of phasing of certain
commercial activities, etc.

to the challenges posed by the
COVID-19 pandemic.

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 2020 the Audit
Committee and the Remuneration
Committee complied with this, while
two of the four Nomination
Committee members were
independent.

With respect to the recommendation
to include external assistance in the
board evaluation at least every third
year, the Supervisory Board
evaluation in 2020 was not
facilitated by an external advisor due

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 2020 Annual General Meeting
(AGM) took place on 16 March. The
minutes of the meeting are available
on www.carlsberggroup.com.

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.

Download our statutory
report on corporate
governance

www.carlsberggroup.com/who-we-are/
corporate-governance/#statutoryreports

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
Supervisory Board considers whether
the number and scope of the
committees are appropriate. The
board committees prepare and
facilitate Supervisory Board
decisions.

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 49-50. While the Executive
Board members are formally
registered as executive directors of
the Company, ExCom collectively

prepares and implements the
Company’s strategic plans.

the executive management of the
Group.

digital, finance, ESG, supply chain,
procurement and emerging markets.

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 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,

The other five members are affiliated
to the Carlsberg Foundation, the
Company’s largest 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.

Chairship
meetings attended

Board
meetings attended

Supervisory Board meetings

Board member

Flemming Besenbacher (Chair)1

Lars Fruergaard Jørgensen (Deputy Chair)1,2

Hans Andersen3

Carl Bache1

Magdi Batato1,2

Domitille Doat-Le Bigot1,2

Lilian Fossum Biner1,2

Richard Burrows1,2

Eva Vilstrup Decker3

Finn Lok3

Erik Lund3

Søren-Peter Fuchs Olesen1

Peter Petersen3

Majken Schultz1

Lars Stemmerik1

1 Elected by the General Meeting. 2 Independent. 3 Employee-elected.

Attended meeting.

Did not attend meeting.

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

THE CARLSBERG
FOUNDATION

The Carlsberg Foundation is the
Company’s largest 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 30% of the capital and 76% of the
votes in Carlsberg A/S.

The Foundation is a long-term, value-
oriented shareholder, supporting the
Group in creating sustainable value
growth 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 26), and in 2020 total cash
returns received by the Foundation
amounted to DKK 1.8bn.

The dividends from Carlsberg A/S 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
2020, this included COVID-19-related
grants amounting to more than DKK
100m. The Foundation also grants
funds to the Carlsberg Research
Laboratory.

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

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 46-48. 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.

Regarding the gender target,
currently three Supervisory Board
members elected by the General
Meeting are women, i.e. 30%. Hence,
the objective with regard to gender
diversity on the Supervisory Board is
currently not met. The Supervisory
Board will continue to work towards
increasing the number of women on
the Supervisory Board.

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.

At Carlsberg Breweries A/S, the four
Supervisory Board members elected
by the General Meeting are men,
being the members of the Chairship
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.

The 2020 Sustainability Report
contains information on our work
with diversity and inclusion in the
Carlsberg Group.

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 Chair and Deputy Chair of the
Supervisory Board constitute the
Chairship. The specific duties of the
Chair – and, in his absence, the
Deputy Chair – are set out in the

Rules of Procedure. In 2020, the
Chairship and the Executive Board
held nine meetings.

The Supervisory Board of Carlsberg
A/S also held nine meetings, of
which one focused solely on COVID-
19 crisis management and strategic
implications.

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
2020, these covered updates on
Carlsberg’s COVID-19 plans,
perspective and impact on employees
and business, digital including
DraughtMaster, internal audit,
research, IT security, market share
development across markets and
brands, and our business in Russia.

Due to COVID-19, most Supervisory
Board meetings in 2020 were
conducted virtually as a necessary
alternative to physical meetings.

SUPERVISORY BOARD
EVALUATION PROCESS
Each year, the Chair 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.

The conclusions of the 2020
evaluation were that all members
allocate sufficient time for their
board work and duties and that all
members are well prepared for the
meetings.

During the evaluation process in
2020, 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 agreed
that the cooperation with the
Executive Board, in line with previous
years, worked well and expressed
satisfaction with management’s fast
and resolute COVID-19 management,
including crisis and action plans, and
the way the Group steered through
the turbulence and high degree of
volatility and uncertainty posed by
the pandemic.

With respect to the three board
committees, the Supervisory Board
found them to be adequate and
working well.

The evaluation process led to a
short catalogue of ideas for the
Supervisory Board work. Together
with management, the ideas will be
considered and, where relevant,
implemented.

COVID-19 required some adjustments
to the Supervisory Board’s ways of
working. The digital nature of
meetings to some extent hampered
the fruitful discussions that usually
take place during meetings.
Nevertheless, the Supervisory Board
is of the opinion that the virtual
meetings were an acceptable
alternative to physical meetings and
that the quality of discussions and
decision-making were not
compromised.

BOARD COMMITTEES

THE NOMINATION COMMITTEE
In 2020, 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.

Nomination Committee meetings

Committee member

Flemming Besenbacher (Chair)

Carl Bache

Richard Burrows

Lars Fruergaard Jørgensen

Attended meeting.

Committee meetings attended

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

SUPERVISORY
BOARD 2020

MAIN TOPICS OF DISCUSSION

Strategy
• Review and discussion of the Group's

COVID-19 strategy and plans.

• Ongoing review of SAIL'22, including
potential impact of COVID-19 on
strategic priorities.

• Review of the progress of the Group’s
sustainability programme, Together
Towards ZERO.

• Review of and debate on R&D,

innovation, branding, quality and other
strategic initiatives.

• Monitoring of the Funding the Journey
culture in the Group's ways of working,
including application of the Operating
Cost Management toolkit to offset the
negative volume and revenue impact from
COVID-19.

• Review and approval of the Group's

capital structure, funding, dividend and
share buy-backs.

• Discussion of organisational

restructuring following COVID-19.
• Discussion and approval of the bonus
structures in the Group’s incentive
programme, ensuring support of and
alignment with SAIL’22.

Compliance
• Review of Carlsberg’s compliance risks
and set-up, including discussion of
compliance-enhancing efforts.

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 & control reports,
working processes and continued
improvement.

• Review and discussion of organic and

• Review and discussion of the Group’s

inorganic opportunities.

Organisation, people, succession planning
and talent management
• Review of the Supervisory Board
composition to ensure the right
competences to support the strategy.
• Succession planning for the executive

management.

• Review of the Group's approach to taking
care of employees during the COVID-19
crisis.

IT & cyber security strategy.
• Review and approval of new tax

policy.

• Discussion of relevant issues and

ways of working with the external
auditor.

• Approval of the external auditor for

election at the 2020 AGM.

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

The Terms of Reference are available
on the Company’s website.
In 2020, 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.
• 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.

THE AUDIT COMMITTEE
In 2020, the Audit Committee
consisted of four 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
2021 and the current Terms of
Reference at the Supervisory Board
meeting in December 2020. The

Audit Committee meetings

Committee member

Lilian Fossum Biner (Chair)

Magdi Batato

Richard Burrows

Lars Fruergaard Jørgensen

Flemming Besenbacher1

Committee meetings attended

1 Not a member of the Committee; attends meetings in his capacity as Chair of the
Supervisory Board.

Attended meeting.

Did not attend extraordinary meeting.

Not a member at the time.

Terms of Reference are available on
the Company’s website.

In 2020, the Audit Committee had
particular focus on a number of
areas, including:
• Monitoring the effectiveness of the
control environment and overseeing
the progress on improving and
further developing the effectiveness
of the controls over financial
reporting.

• Monitoring the external financial
reporting and the work of the
external auditors.

• Reviewing the progress of the work

of the Group Internal Audit
function.

• Reviewing the work regarding

Speak Up matters (see page 45).

• Managing financial risk.
• Reviewing the risk management

process.

• Reviewing the new tax policy.

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.
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. It
defines who is responsible and
provides assurance that key risks are
covered by mitigating internal
control assertions.

As a consequence of the Group’s
growth due to acquisitions, systems
and processes are not standardised
across entities. The current state of
the control environment has
improved in 2020 and is at an
acceptable level, but not yet where
the Group wants it to be.

The Group will continue to
strengthen the 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
central internal control 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.

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

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 was carried out as
planned in 2020 and will continue in
2021.

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.

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.

drawn up for the year. The plan is
reviewed and approved by the Audit
Committee. In 2020, Group Internal
Audit conducted audits mainly in the
areas of financial reporting controls,
compliance (internal and external
regulation), information technology
and third-party risk management.

The Misconduct Investigation
Handbook was updated in 2020 to
clarify how investigations should be
undertaken. During 2019, there was
also a campaign to raise awareness
of the various Speak Up channels
available. A new campaign will be
launched in 2021.

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.

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 Conduct and/
or Group policies.

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.

More information regarding the
Speak Up system, including reported
concerns and disciplinary actions,
can be found in the Sustainability
Report.

The financial risks are assessed and
reviewed at multiple levels in the
Group, including monthly
performance review meetings at
ExCom level, periodic review of
control documentation, and audits
performed by Group Internal Audit.

The Speak Up system is operated by
an external provider and allows
concerns to be brought to the
attention of the Group Speak Up
Review team anonymously,
confidentially and via multiple
channels.

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 (see pages
37-39), an internal audit plan is

The Speak Up Review 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 Speak Up Summary report also
contains an overview of other open
and closed investigations and the
time taken to resolve cases.

SUPERVISORY BOARD

SUPERVISORY
BOARD

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

LARS FRUERGAARD JØRGENSEN

DEPUTY CHAIR (SINCE 2019)
Nationality: Danish
Year of birth: 1966
Appointed (until): 2019 (2021)

BOARD FUNCTION
Non-executive, independent director.

BOARD COMMITTEES
Audit Committee, Nomination
Committee.

PROFESSION
President & CEO, Novo Nordisk.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

SUPERVISORY
BOARD
MEMBERS

FLEMMING BESENBACHER

CHAIR (SINCE 2012)
Nationality: Danish
Year of birth: 1952
Appointed (until): 2005 (2021)

BOARD FUNCTION
Non-executive, non-independent
director.

BOARD COMMITTEES
Nomination Committee (Chair).

PROFESSION
Professor, D.Sc., h.c. mult, FRSC;
Chair of the Board of Directors of the
Carlsberg Foundation.

OTHER COMPANY BOARD
POSITIONS
Chair of the Board of Directors of
Aarhus Vand. Member of the Board
of Directors of Unisense.

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

HANS ANDERSEN
Nationality: Danish
Year of birth: 1955
Appointed (until): 1998 (2022)

MAGDI BATATO
Nationality: Swiss
Year of birth: 1959
Appointed (until): 2018 (2021)

LILIAN FOSSUM BINER
Nationality: Swedish
Year of birth: 1962
Appointed (until): 2019 (2021)

BOARD FUNCTION
Employee representative.

BOARD COMMITTEES
None.

PROFESSION
Brewery worker, Carlsberg Supply
Company Danmark A/S.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

CARL BACHE
Nationality: Danish
Year of birth: 1953
Appointed (until): 2014 (2021)

BOARD FUNCTION
Non-executive, non-independent
director (member of the Board of
Directors of the Carlsberg
Foundation).

BOARD COMMITTEES
Nomination Committee.

PROFESSION
Professor, Ph.D., Dr.Phil.; head of
the Doctoral School of the
Humanities at the University of
Southern Denmark.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

BOARD FUNCTION
Non-executive, independent director.

BOARD COMMITTEES
Audit Committee, Remuneration
Committee.

PROFESSION
Executive Vice President and Head of
Operations, Nestlé S.A.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

BOARD COMMITTEES
Audit Committee (Chair).

PROFESSION
Non-executive board director.

OTHER COMPANY BOARD
POSITIONS
Member of the Board of Directors of
Scania, a-connect, Givaudan and L E
Lundbergföretagen.

DOMITILLE DOAT-LE BIGOT
Nationality: French
Year of birth: 1972
Appointed (until): 2019 (2021)

RICHARD BURROWS
Nationality: Irish
Year of birth: 1946
Appointed (until): 2009 (2021)

BOARD FUNCTION
Non-executive, independent director.

BOARD COMMITTEES
Remuneration Committee.

PROFESSION
Chief Digital Officer, Danone.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

Domitille Doat-Le Bigot has notified the
Supervisory Board that she is not standing
for re-election at the Annual General
Meeting.

BOARD COMMITTEES
Remuneration Committee (Chair),
Audit Committee, Nomination
Committee.

PROFESSION
Non-executive board director.

OTHER COMPANY BOARD
POSITIONS
Chair of the Board of Directors of
British American Tobacco.

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

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 (2021)

BOARD FUNCTION
Employee representative.

BOARD COMMITTEES
None.

PROFESSION
Senior Director, Carlsberg
Breweries A/S.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

FINN LOK
Nationality: Danish
Year of birth: 1958
Appointed (until): 2014 (2022)

BOARD FUNCTION
Employee representative.

BOARD COMMITTEES
None.

PROFESSION
Ph.D. and Brew Master, Principal
Scientist, Carlsberg A/S.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

BOARD FUNCTION
Employee representative.

BOARD COMMITTEES
None.

PROFESSION
Head Brewer, Carlsberg A/S.

OTHER COMPANY BOARD
POSITIONS

None other than Carlsberg A/S.

SØREN-PETER FUCHS OLESEN
Nationality: Danish
Year of birth: 1955
Appointed (until): 2012 (2021)

BOARD FUNCTION
Non-executive, non-independent
director (member of the Board of
Directors of the Carlsberg
Foundation).

BOARD COMMITTEES
Remuneration Committee.

PROFESSION
Professor, D.M.Sc; CEO of the
Danish National Research
Foundation.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

BOARD FUNCTION
Employee representative.

BOARD COMMITTEES
None.

PROFESSION
President of the Staff Association;
Process Lead, Carlsberg Supply
Company Danmark A/S.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

MAJKEN SCHULTZ
Nationality: Danish
Year of birth: 1958
Appointed (until): 2019 (2021)

BOARD FUNCTION
Non-executive, non-independent
director (member of the Board of
Directors of the Carlsberg
Foundation).

BOARD COMMITTEES
None.

PROFESSION
Professor, Ph.D., Copenhagen
Business School. International
Research Fellow, Saïd Business
School, Oxford University.
OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

BOARD FUNCTION
Non-executive, non-independent
director (member of the Board of
Directors of the Carlsberg
Foundation).

BOARD COMMITTEES
None.

PROFESSION
Professor, D.Sc., University of
Copenhagen.

OTHER COMPANY BOARD
POSITIONS
None other than Carlsberg A/S.

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

EXECUTIVE
COMMITTEE

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

EXECUTIVE
COMMITTEE
MEMBERS

CEES ’T HART

CEO
Nationality: Dutch
Year of birth: 1958
Appointed: 2015

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 Chair of the
Supervisory Board of KLM and a
member of the Board of AFKLM.

HEINE DALSGAARD

CFO
Nationality: Danish
Year of birth: 1971
Appointed: 2016

Heine joined the Carlsberg Group
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

experience includes various senior
management and financial positions
at Carpetland, Hewlett Packard and
Arthur Andersen. Heine is member of
the Board of Directors and Chair of
the Audit Committee of Novozymes.

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.

Europe & 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.

JOÃO ABECASIS

PHILIP A. HODGES

JACEK PASTUSZKA

CHIEF COMMERCIAL OFFICER
Nationality: Portuguese
Year of birth: 1972
Appointed: 2019

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

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 interim 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.

GRAHAM FEWKES

EXECUTIVE VICE PRESIDENT
ASIA
Nationality: British
Year of birth: 1968
Appointed: 2014

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.

LARS LEHMANN

EXECUTIVE VICE PRESIDENT
EASTERN EUROPE (FROM 1
JANUARY 2021: CENTRAL &
EASTERN EUROPE)
Nationality: Danish
Year of birth: 1966
Appointed: 2019

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

Lars joined the Carlsberg Group in
2003 as Commercial Development
Director. Since then, he has held
several management positions,
including VP Commercial for Eastern

Jacek was appointed EVP, Western
Europe in 2019. Before that, he was
EVP, Eastern Europe. Jacek joined
the Carlsberg Group 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

Chris joined the Carlsberg Group as
Senior Vice President, Asia in 2014.
During his tenure, he has held
several positions on the Executive

Committee. Chris previously worked
for H.J. Heinz, where he held various
senior management positions in
Continental and Eastern Europe and
in Asia Pacific. Before Heinz, Chris
worked for The Coca-Cola Company
and P&G.

CHANGES TO EXCOM IN 2021
Jacek Pastuszka will leave the
Carlsberg Group at the end of
February 2021. Graham Fewkes will
take up the position as Executive
Vice President, Western Europe, as
of 1 March 2021.

Leo Evers has been appointed to
replace Graham as Executive Vice
President, Asia. He joins Carlsberg
from Heineken, where he has held
several senior positions in Asia,
including Regional Managing
Director of Heineken Asia Pacific and
Managing Director of Heineken
Vietnam.

SHARE INFORMATION

INFORMATION
FOR SHAREHOLDERS

CARLSBERG GROUP ANNUAL REPORT 2020 GOVERNANCE

Carlsberg A/S is listed on
Nasdaq Copenhagen. The
Company has around 52,000
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.

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
the ADR programme is available on
our investor website.

MAJOR SHAREHOLDERS
At 31 December 2020, the
Company’s largest shareholder was

CARLSBERG B SHARE 2020
(DKK)

SHAREHOLDER GEOGRAPHIC SPLIT
(excluding the Carlsberg Foundation
and treasury shares)

the Carlsberg Foundation with 30%
of the capital and 76% 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 Company
conducted a share buy-back
programme in 2020. For more
information, see page 26.

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
annual and half-year reports, and a
two-week silent period prior to the
Q1 and Q3 trading statements.

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 event
calendar.

At the end of 2020, a total of
29 brokers had coverage of the
Company. The analysts’ names and
consensus estimates can be found on
the website.

1,100

900

700

500

300

100

n
a
J

b
e
F

r
a
M

r
p
A

y
a
M

n
u
J

u
J

g
u
A

p
e
S

t
c
O

v
o
N

c
e
D

Share information
Share class

Number of issued shares¹

Number of issued shares,
excl. treasury shares¹

Carlsberg Foundation

Votes per share

Par value

Total

33,699,252

114,457,554

148,156,806

33,699,252

111,402,379

145,101,631

33,065,996

10,829,392

43,895,388

DKK 20

Share price, year-end

DKK 1,010.0

DKK 975.2

Proposed dividend per share

DKK 22.0

¹ At 31 December 2020.

Financial calendar 2021
Event

Annual General Meeting

Q1 trading statement

H1 interim financial
statement

Q3 trading statement

Date

15 March

28 April

18 August

28 October

Forward-looking statements and ESEF

CARLSBERG GROUP ANNUAL REPORT 2020 FORWARD-LOOKING STATEMENTS AND ESEF

FORWARD-LOOKING
STATEMENTS AND ESEF

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 management
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.

ESEF data

Domicile of entity

Description of nature of entity’s operations and principal
activities

Country of incorporation

Principal place of business

Legal form of entity

Denmark

Brewing company

Denmark

Global

A/S

Name of reporting entity or other means of identification

Carlsberg A/S

Address of entity's registered office

1 J. C. Jacobsens Gade
1799 Copenhagen V

Consolidated financial statements

CONSOLIDATED
FINANCIAL STATEMENTS

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL
STATEMENTS

Income statement ................................... 54

Statement of comprehensive
income ......................................................... 54

Statement of financial position ......... 55

Statement of changes in equity ........ 56

Statement of cash flows ...................... 57

Notes ............................................................ 58

PARENT COMPANY FINANCIAL
STATEMENTS

Statements .............................................. 127

Notes ......................................................... 130

REPORTS

Management statement ................... 137

Auditor’s reports ................................... 138

SECTION 1
OPERATING ACTIVITIES
1.1 Segmentation of operations ..................60
1.2 Operating expenses, inventories

and deposit liabilities ................................63

1.3 Foreign exchange risk related to

earnings ........................................................65

1.4 Cash flow from operating

activities ........................................................66

1.5 Trade receivables and on-trade

loans ..............................................................67

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 .....................................................84
3.3 Contingent liabilities .................................85

SECTION 4
FINANCING COSTS, CAPITAL
STRUCTURE AND EQUITY
4.1 Financial income and expenses ............87
4.2 Net interest-bearing debt .......................88
4.3 Capital structure ........................................88
4.4 Borrowings and cash................................91
Interest rate risk .........................................92
4.5
4.6 Foreign exchange risk related to

net investments and financing
activities ........................................................93
4.7 Funding and liquidity risk ........................95
4.8 Derivative financial instruments............97

SECTION 5
ACQUISITIONS, DISPOSALS,
ASSOCIATES AND JOINT VENTURES
5.1
Investment model and risks ...................99
5.2 Acquisitions and disposals ................... 100
5.3 Non-controlling interests .................... 102
5.4 Contingent considerations ................... 103
5.5 Associates and joint ventures ............. 104

SECTION 6
TAX
6.1
Income tax ................................................ 105
6.2 Tax assets and liabilities ...................... 106

SECTION 7
STAFF COSTS AND REMUNERATION
7.1 Staff costs ................................................. 108
7.2 Remuneration .......................................... 109
7.3 Share-based payments ........................ 109
7.4 Retirement benefit obligations

and similar obligations ......................... 111

SECTION 8
OTHER DISCLOSURE REQUIREMENTS
8.1 Earnings per share ................................. 114
8.2 Fees to auditors ...................................... 115
8.3 Related parties ........................................ 115
8.4 Events after the reporting period ...... 115

SECTION 9
BASIS FOR PREPARATION
9.1 Significant accounting estimates

and judgements ...................................... 116
9.2 General accounting policies ................ 116
9.3 Changes in accounting policies .......... 120
9.4 New legislation ....................................... 120
9.5 New segmentation* ............................... 121

SECTION 10
GROUP COMPANIES
10 Group companies.................................... 123

* The segmented quarterly information on page 122
is part of the Management Review.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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

2020

58,541

-30,180

28,361

2019

DKK million

65,902

-33,264

32,638

Consolidated profit

Other comprehensive income

1.2.3

-15,373

-17,826

Retirement benefit obligations

-3,453

-151

315

9,699

-247

373

-784

9,041

-2,233

6,808

-4,733

Share of other comprehensive income in associates and joint ventures

108

278

10,465

501

360

-1,098

10,228

-2,751

7,477

Income tax

Items that will not be reclassified to the income statement

Foreign exchange adjustments of foreign entities

Fair value adjustments of hedging instruments

Other

Income tax

Items that will be reclassified to the income statement

Other comprehensive income

Total comprehensive income

Attributable to

778

6,030

908

6,569

Non-controlling interests

Shareholders in Carlsberg A/S

1.2.4

5.5

3.1

4.1

6.1

1.1

8.1

41.3

41.1

43.7

43.4

Section

2020

6,808

2019

7,477

7.4

5.5

6.1

4.1

6.1

-4

-42

-45

-7,640

198

-22

-7,464

-7,509

-701

-571

-529

3,485

-323

3,193

2,664

10,141

456

-1,157

905

9,236

STATEMENT OF FINANCIAL POSITION

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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

Section 31 Dec. 2020

31 Dec. 2019

DKK million

Section 31 Dec. 2020

31 Dec. 2019

2.2, 2.3

5.5

1.5

6.2

66,061

26,299

4,188

1,505

1,767

70,027

27,607

4,364

1,179

1,938

EQUITY AND LIABILITIES

Equity

Share capital

Reserves

Retained earnings

Equity, shareholders in Carlsberg A/S

Non-controlling interests

99,820

105,115

Total equity

1.2.1

1.5

4.4.2

4,613

3,725

211

1,585

769

8,093

18,996

4,751

5,339

199

1,661

776

5,222

17,948

Non-current liabilities

Borrowings

Retirement benefit obligations

Tax liabilities

Provisions

Other liabilities

Total non-current liabilities

118,816

123,063

Current liabilities

Borrowings

Trade payables

Deposits on returnable packaging materials

Provisions

Tax payables

Other liabilities

Total current liabilities

Total liabilities

Total equity and liabilities

4.3.2

4.2, 4.4.1

7.4

6.2

3.2

5.4

4.2, 4.4.1

1.2.2

3.2

2,963

-40,824

77,169

39,308

4,054

43,362

29,291

2,934

6,265

3,319

5,196

47,005

959

16,598

1,276

1,277

925

7,414

28,449

75,454

118,816

3,051

-33,651

74,049

43,449

2,585

46,034

20,879

3,299

6,447

4,037

9,056

43,718

4,112

17,149

1,545

1,663

999

7,843

33,311

77,029

123,063

STATEMENT OF CHANGES IN EQUITY

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

DKK million

2020

Equity at 1 January

Consolidated profit

Other comprehensive income

Total comprehensive income for the year

Cancellation of treasury shares

Share-based payments

Dividends paid to shareholders

Share buy-back

Non-controlling interests

Acquisition of entities

Total changes in equity

Equity at 31 December

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

Section

Shareholders in Carlsberg A/S

Share
capital

3,051

Currency
translation

-32,930

Hedging
reserves

Total
reserves

-721

-33,651

-88

-7,285

112

-7,173

-88

-7,285

2,963

-40,215

112

-609

-7,173

-40,824

4.3.4

4.3.2

7.3

4.3.3

5.3

Section

Shareholders in Carlsberg A/S

Share
capital

Currency
translation

3,051

-36,116

Hedging
reserves

-721

4.3.4

7.3

4.3.3

3,051

3,186

-32,930

Total
reserves

-36,837

3,186

Retained
earnings

74,049

6,030

-14

6,016

-3,093

-2,900

3,144

-182

3,120

77,169

Retained
earnings

79,088

6,569

-518

6,051

214

-2,738

-4,100

-4,466

-5,039

Non-
controlling
interests

Total
equity

2,585

46,034

778

-322

456

-5

-805

614

1,209

1,469

4,054

6,808

-7,509

-701

-3,898

-2,900

3,758

1,027

-2,672

43,362

Total

43,449

6,030

-7,187

-1,157

-3,093

-2,900

3,144

-182

-4,141

39,308

Non-
controlling
interests

Total

Total
equity

45,302

2,586

47,888

6,569

2,668

9,237

214

-2,738

-4,100

-4,466

-1,853

908

-4

904

-853

-55

-1

7,477

2,664

10,141

217

-3,591

-4,100

-4,521

-1,854

-721

-33,651

74,049

43,449

2,585

46,034

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF CASH FLOWS

DKK million

Operating profit before special items

Depreciation, amortisation and impairment losses

Section

2.3

Operating profit before depreciation, amortisation and impairment losses

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 activities

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 January

1.4

5.2

4.3.2

4.3.3

4.4.1

Foreign exchange adjustment of cash and cash equivalents

Cash and cash equivalents at 31 December

4.4.2

2020

9,699

4,386

14,085

-532

1,321

-1,033

-531

-521

-1,958

10,928

-4,396

222

339

-3,835

7,093

-2,409

317

-2,036

-5,871

5,057

-3,093

-2,900

-877

5,060

2019

10,465

4,542

15,007

-320

491

634

-445

139

-1,033

-2,234

12,239

-4,588

1,714

-2,824

9,415

-41

-59

626

551

-4

-2,277

9,962

-2,738

-4,100

-2,520

-935

-1,810

-10,293

3,247

5,149

-438

7,958

-331

5,434

5,149

Acquisition of property, plant and equipment and intangible assets
includes the purchase of the Brooklyn brand rights.
Cash and cash equivalents are reported less bank overdrafts.

SECTION 1

OPERATING
ACTIVITIES

58.5bn

REVENUE (DKK)
Revenue declined by 11.2%, amounting to
DKK 58,541m (2019: DKK 65,902m). Revenue
was negatively impacted by COVID-19 in most
markets and by negative currency
developments, mainly in Russia, Norway and
China.

REVENUE DEVELOPMENT (%)

-8.4%

0.3% -3.1%

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

48.4%

GROSS MARGIN
Cost of sales per hl improved organically by
3%, positively impacted by country and product
mix.

The gross margin declined by 110bp to 48.4%,
as supply chain efficiencies were not enough to
offset the under-absorption of fixed costs and
the channel and product mix. The gross margin
was also impacted by country mix.

9.7bn

OPERATING PROFIT (DKK)
Operating expenses, including marketing
investments, declined organically by 14% as a
result of tight cost control. The main areas in
which costs fell were marketing, travel, supply
chain and administration, including employee-
related costs. Reported operating expenses as
a percentage of revenue declined by 200bp.
Excluding marketing expenses, operating
expenses declined organically by 13%.

Operating profit before depreciation,
amortisation and impairment losses (EBITDA)
declined by 2.4% organically and by 6.1% in

reported terms. The EBITDA margin improved
by 130bp to 24.1%.

6.0bn

The Asian and Eastern European regions
delivered solid organic operating profit growth
and strong operating margin improvements,
while operating profit declined in Western
Europe.

Operating profit before special items was
DKK 9,699m (2019: DKK 10,465m). The
Group’s operating margin increased by 70bp
to 16.6%.

OPERATING PROFIT DEVELOPMENT (%)

-3.1%

-0.3% -3.9%

NET PROFIT (DKK)
Special items, net, amounted to DKK -247m
(2019: DKK 501m). Special items were
positively impacted by reversal of a provision
made in a purchase price allocation, offset
mainly by restructuring costs related to Reset
for the future, and write-down of a brand in
Cambodia.

Financial items, net, amounted to DKK -411m
against DKK -738m in 2019. Excluding
currency gains and losses, financial expenses,
net, amounted to DKK 550m (2019: DKK
650m), positively impacted by lower other
financial expenses.

Tax totalled DKK -2,233m against DKK
-2,751m in 2019. The effective tax rate of
24.7% was positively impacted by tax-exempt
and non-deductible special items. Excluding
these, the effective tax rate would have been
25.7%.

Consolidated profit was DKK 6,808m
compared to DKK 7,477m in 2019. The decline
was due to lower operating profit and special

10.9bn

OPERATING CASH FLOW (DKK)
Cash flow from operating activities amounted
to DKK 10,928m against DKK 12,239m in
2019.

The change in trade working capital was DKK
+1,321m (2019: DKK +491m), mainly due to
lower trade receivables, impacted by lower
sales as a result of the increased COVID-19-
related restrictions towards the end of the year.
Average trade working capital to revenue
improved from -16.8% in 2019 to -18.6%.

The change in other working capital was DKK
-1,033m (2019: DKK +634m), partly impacted
by phasing and lower VAT payable.

Restructuring costs paid amounted to DKK
-531m (2019: DKK -445m). Net interest etc.
paid amounted to DKK -424m (2019: DKK
-894m). The decline was mainly due to the
settlement of financial instruments.

Corporation tax paid was DKK -1,958m (2019:
DKK -2,234m). The decrease versus last year
was mainly due to lower earnings.

items, partly offset by lower financial
expenses, net, and the lower tax rate.

The Carlsberg Group’s share of consolidated
profit was DKK 6,030m (2019: DKK 6,569m).

Non-controlling interests were DKK 778m
(2019: DKK 908m), impacted by challenging
market conditions in Malaysia, and the new
joint venture with Marston's in the UK, of
which the Group owns 60%.

41.3

EARNINGS PER SHARE (DKK)
Earnings per share were DKK 41.3 (2019: DKK
43.7). Adjusted for special items after tax,
earnings per share were DKK 43.6 (2019: DKK
41.0), corresponding to a 6.3% improvement.

EARNINGS PER SHARE (DKK)

EPS

EPS-A

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

5.1bn

FREE CASH FLOW (DKK)
Free cash flow amounted to DKK 5,057m
(2019: DKK 9,962m), while free operating cash
flow amounted to DKK 7,093m (2019: DKK
9,415m).

Operational investments totalled DKK -3,835m
(2019: DKK -2,824m), impacted by the
purchase of the Brooklyn brand rights. In 2019,
operational investments were impacted by the
disposal of the brewery site in Norway.

Total financial investments amounted to DKK
-2,036m (2019: DKK +551m), impacted by
the acquisition of Marston’s brewing activities,
the prepayment of the purchase price for
Wernesgrüner Brewery, Germany, and lower
dividends received.

FREE CASH FLOW (DKKm)

Free operating cash flow
Free cash flow

Total cash flow to investments in entities and
brand rights, including acquisition of non-
controlling interests, amounted to DKK 3.2bn
(2019: DKK 1.7bn). For 2020, this primarily
included the acquisitions of Marston’s brewing
activities in the UK, and the acquisition of
Wernesgrüner Brewery and the Brooklyn brand
rights.

3.2bn

ACQUISITIONS (DKK)
The cash flow for the purchase of the Brooklyn
brand rights was included in operational
investments.

The cash consideration paid on acquisition of
60% of Marston’s brewing activities in the UK
and the prepayment on the acquisition of
Wernesgrüner Brewery amounted to DKK
2.4bn and was recognised as financial
investments in the cash flow statement.

The prepayment on the acquisition of
Wernesgrüner Brewery was recognised as a
non-current receivable. The transaction was
completed on 1 January 2021.

Total cash flow to investments in brand rights
and entities thereby amounted to DKK 3.2bn.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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 declined by DKK -7,361m in
2020 and was negatively impacted by the
lower volumes in Western Europe and Asia and
deterioration in price/mix in Western Europe
and Eastern Europe, along with a negative
currency impact in all three regions.

Not allocated revenue, DKK 25m (2019: DKK
72m), consisted of DKK 1,112m (2019: DKK
1,355m) in revenue and DKK -1,087m (2019:
DKK -1,283m) from eliminations of sales
between the geographical segments.

Revenue in Denmark was impacted by lower
sales of soft drinks at the German/Danish
border.

The DKK value of revenue in Russia for 2020
was impacted by the 11.4% decrease in the
average RUB/DKK rate.

CHANGES TO SEGMENTATION
The Group’s regional structure was changed
effective 1 January 2021, with the aim of
rebalancing the European regions in terms of
size and number of business units.

Segmentation of income statement

DKK million

2020

Revenue

Total cost

Share of profit after tax of associates and joint ventures

Operating profit before special items

Western
Europe

31,547

-26,763

209

4,993

Asia

16,959

-13,057

3,991

Not
allocated

Beverages,
total

Non-
beverage

Carlsberg
Group, total

Eastern
Europe

10,010

-8,093

1,917

-1,183

58,541

-1,208

-49,121

Special items, net

Financial items, net

Profit before tax

Income tax

Consolidated profit

Operating margin

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

The segmentation used in the Annual Report
2020 is unchanged. Please refer to section 9.5
for further disclosures.

-36

-19

-3

-8

-30

-23

-101

-59

-67

-10

-136

-121

58,541

-49,157

315

9,699

-247

-411

9,041

-2,233

6,808

16.6%

65,902

-55,715

278

10,465

501

-738

10,228

-2,751

7,477

15.9%

298

9,718

-244

-403

9,071

-2,240

6,831

16.6%

65,902

-55,615

236

10,524

568

-728

10,364

-2,766

7,598

16.0%

15.8%

23.5%

19.2%

36,317

-30,320

190

6,187

18,416

-14,536

3,931

11,097

-9,215

-1,543

-5

1,882

-1,476

17.0%

21.3%

17.0%

Revenue and excise duties

Geographical allocation of revenue

DKK million

Revenue, including
excise duties

Excise duties

Revenue

2020

2019

DKK million

2020

2019

83,182

-24,641

58,541

93,483

Denmark (Carlsberg
A/S’ domicile)

-27,581

China

65,902

Russia

Other countries

Total

3,512

9,858

6,405

38,766

58,541

4,736

8,999

7,307

44,860

65,902

SECTION 1.1 (CONTINUED)
SEGMENTATION OF
OPERATIONS

OPERATING PROFIT BEFORE
SPECIAL ITEMS
Not allocated operating profit before special
items, DKK -1,183m (2019: DKK -1,476m),
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 62m (2019:
DKK 71m).

VOLUMES
Organic growth in total volumes was impacted
by declining volumes in Western Europe and
Asia primarily due to COVID-19, partly offset
by growth in Eastern Europe.

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. Also
included are two months of earnings in the
newly established Carlsberg Marston's Brewing
Company Limited. Non-controlling interests
are not individually material to the Group’s
total profit.

Non-controlling interests hold 40% of the
shares in Carlsberg Marston's Brewing
Company Limited, which includes Marston’s
brewing activities and the Group’s activities in
the UK.

The material asset restructuring whereby
Carlsberg and Chongqing Brewery Co.
contributed their controlled assets to
Chongqing Jianiang Brewery was completed in
December 2020. The transaction had an
immaterial impact on the allocation of the
consolidated profit for the year between the
shareholders in Carlsberg A/S and non-
controlling interests for 2020.

With the full-year effect of these transactions,
non-controlling interests’ share of the result in
Carlsberg Marston's Brewing Company

Group financial performance

Volumes (million hl)

Beer

Non-beer

Total volume

DKK million

Revenue

Change

2019

113.0

21.9

134.9

Organic

Acq., net

-2.8%

-8.7%

-3.8%

0.2%

0.0%

0.2%

2020

110.1

20.0

130.1

Change

Reported

-2.6%

-8.7%

-3.6%

Operating profit before special items

10,465

Operating margin (%)

15.9

65,902

-8.4%

-3.1%

0.3%

-0.3%

-3.1%

-3.9%

58,541

-11.2%

9,699

16.6

-7.3%

70bp

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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.

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 judgements on the classification 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.

Limited, UK, and Chongqing Brewery Group,
China, is expected to increase for 2021. The
transactions are described in more detail in
sections 5.2 and 5.3.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 1.1 (CONTINUED)
SEGMENTATION OF
OPERATIONS

ACCOUNTING
POLICIES

Revenue
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.

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.

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.

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.

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 specific promotions of this nature
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 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 1.2
OPERATING
EXPENSES,
INVENTORIES AND
DEPOSIT LIABILITIES

Inventories

DKK million

Raw materials

Work in progress

Finished goods

Total

2020

2,072

295

2,246

4,613

2019

2,116

333

2,302

4,751

1.2.1 COST OF SALES AND INVENTORIES
Cost of sales decreased by 9% compared with
2019, mainly as a result of lower volumes in
Western Europe and Asia, and lower input
costs in Eastern Europe due to foreign
exchange. Cost of sales per hl decreased by
approximately 6% compared with 2019.

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.

Cost of sales

DKK million

Cost of materials

Direct staff costs

Amortisation and
depreciation

Indirect production
overheads

Purchased finished goods
and other costs

Total

2020

2019

17,830

19,222

1,297

1,441

As the underlying markets for the specified
categories vary, so does the way in which they
are hedged against price increases.

2,704

2,637

4,062

4,433

The most common form of hedging is fixed-
price purchase agreements with suppliers in
local currencies.

4,287

5,531

30,180

33,264

It is Group policy to fix the prices of 70% of
malt (barley) purchases for a given year no

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 Group’s exposure for 2020 was therefore
hedged through fixed-price purchase
agreements entered into during 2019. Likewise,
the majority of the exposure for 2021 has been
hedged during 2020. 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 Asia.

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.

In 2020, 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 2021. The fair
values of the financial instruments are specified
in section 4.8.

Inventories decreased by 3% compared with
2019, mainly impacted by minor changes to
phasing of campaigns.

In general, write-offs of inventories did not
increase significantly in 2020, as the Group
managed to adapt the business and decrease
production in line with customer demand.

Hedging of raw material price risk

DKK million

2020

Aluminium

2019

Aluminium

Sensitivity assuming
100% efficiency

Time of
maturity

Change

+10%

Change

+10%

Effect
on OCI

Tonnes
purchased

Average
price (DKK)

2021

66,323

11,132

66,323

Effect
on OCI

Tonnes
purchased

Average
price (DKK)

2020

63,861

12,512

63,861

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 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.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING ESTIMATES
AND JUDGEMENTS

Sales and distribution expenses

as a consequence of the impact of COVID-19
as further described in section 1.5.1.

2020

4,390

5,101

5,882

2019

5,581

5,768

6,477

Other operating activities, net

15,373

17,826

DKK million

2020

2019

SECTION 1.2 (CONTINUED)
OPERATING
EXPENSES,
INVENTORIES AND
DEPOSIT LIABILITIES

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 1,276m (2019: DKK
1,545m). The capitalised value of returnable
packaging materials was DKK 1,791m (2019:
DKK 2,102m). The decline in deposits is a
consequence of the lower volumes sold, which
led to a lower need for reinvestment and
thereby a lower capitalised value of returnable
packaging materials.

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.

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 depreciated over the expected useful life.

DKK million

Marketing expenses

Sales expenses

Distribution expenses

Total

ACCOUNTING
POLICIES

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.

Returnable packaging materials are depreciated over
3-10 years. The accounting policies for property, plant
and equipment are further described in section 2.3.

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.

1.2.3 SALES AND DISTRIBUTION
EXPENSES
Total sales and distribution expenses decreased
by 14% in reported terms and by 11% organically,
as a result of tight cost control in response to the
COVID-19 lockdowns and restrictions.

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.

Trade marketing is promotional activities directed
towards customers, such as the supply of point-of-
sale materials, promotional materials and trade
offers.

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. On-trade loans, net, are
impacted by impairment of outstanding loans

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

-204

-123

-151

-133

130

108

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

Impact on operating profit
Developments in exchange rates between DKK
and the functional currencies had a negative
impact of 3.9% on operating profit measured in
DKK.

Entities in

The eurozone

China

Russia

United Kingdom

Switzerland

Norway

Sweden

Laos

Functional
currency

Change in average FX
rate 2019 to 2020

EUR

CNY

RUB

GBP

CHF

NOK

SEK

LAK

-0.16%

-2.10%

-11.40%

-1.60%

3.80%

-8.20%

1.00%

-5.50%

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. The Group aims
to hedge 70-90% of future cash flows in
currencies other than the local functional
currency on a four-quarter rolling basis.

REVENUE BY CURRENCY (%)

2020 (2019)

EUR 18% (19%)
RUB 11% (11%)
NOK 6% (5%)
CHF 5% (5%)
LAK 4% (4%)

CNY 17% (14%)
DKK 8% (10%)
GBP 5% (5%)
SEK 4% (4%)
Other 22% (23%)

The EUR/DKK exposure is considered to be
limited and is not hedged.

Western Europe
For the entities in Western Europe, a major
part of the purchases in foreign currencies is in
EUR. This also applies for markets with a
functional currency other than 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 a hedge of (parts of) the revenue
in the relevant currency and are accounted
for as cash flow hedges, cf. section 4.8. The
hedged amounts and the sensitivity analysis
regarding these hedges are shown in
section 4.6.4.

Asia
The transaction risk is considered to be less
significant due to 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.
Furthermore, the currencies are expensive to
hedge and, in some cases, not possible to
hedge at all. 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 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 2020 and 2021, the Group has
chosen to hedge a portion of Baltika Breweries’
and Carlsberg Ukraine’s expenses in USD. The
volatility of the Eastern European currencies
will continue to affect operating profit
measured in both DKK and local currencies.
Furthermore, some of the entities in Eastern
Europe hold intercompany deposits in EUR and
USD. The revaluation of these is recognised in
financial items.

TRANSLATION RISK
The Group is exposed to risk from translation
of foreign entities into the Group’s presentation
currency, DKK.

The single largest translation exposure in
respect of operating profit in 2020 was RUB
due to the double-digit depreciation of the
currency compared with 2019. Looking into
2021, the largest exposure in terms of EBIT
and currency volatility is CNY, while RUB
remains the single largest exposure on
translation of net investments in foreign
entities.

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. To reduce the
risk, the Group has raised debt denominated in
the currencies in which the Group generates
significant earnings and cash flow.

Income tax paid amounted to DKK -1,958m
(2019: DKK -2,234m). The decrease in tax
paid was the result of lower operating profit in
some markets, mainly Laos, Greece, Norway
and Russia.

Cash flow from disposal of property, plant
and equipment and intangible assets was
DKK 222m (2019: DKK 1,714m). In 2019, the
cash flow included the proceeds from disposal
of the former brewery sites in Trondheim,
Norway, and Hamburg, Germany, totalling
DKK 1,503m.

Average trade working capital improved from
-16.8% to -18.6% of revenue, primarily due to
the decrease in revenue.

SECTION 1.4
CASH FLOW FROM
OPERATING
ACTIVITIES

Change in trade working capital amounted to
DKK 1,321m (2019: DKK 491m), primarily due
to a decline in trade receivables due to lower
sales and increased impairments. This was
partly offset by a decrease in deposit liabilities.

Other working capital decreased by
DKK 1,033m (2019: increase of DKK 634m),
mainly impacted by lower VAT payable and
changes in provisions.

The change in on-trade loans amounted to
DKK 339m (2019: DKK 50m).

Restructuring costs paid amounted to
DKK -531m (2019: DKK -445m), a large
part of which relates to termination benefits
to employees made redundant due to
optimisations and reorganisations across
the Group.

Net interest etc. paid amounted to DKK -424m
(2019: DKK -894m). The decrease in net
interest was mainly due to settlements of
derivative financial instruments as well as lower
interest income.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

Other specifications of cash flow from operating activities

DKK million

Other non-cash items

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

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

Section

2020

2019

5.5

2.3

7.4

-315

-53

-199

-7

-278

-56

217

-162

-41

-532

-320

-1

1,484

-162

1,321

111

-403

-601

-140

-1,033

-188

597

491

254

268

154

-42

634

-464

-685

353

450

339

426

309

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. As at
31 December 2020, it also includes the
prepayment for the acquisition of
Wernesgrüner Brewery, Germany. Of the total
non-current receivables, DKK 258m (2019:
DKK 207m) falls due more than five years
from the reporting date.

Credit risk on receivables

DKK million

2020

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 2019

Gross
receivables

Loss
allowance

Receivables,
net

3,178

349

178

406

4,111

797

796

1,638

1,595

127

1,787

7,536

8,891

-182

-87

-75

-355

-699

-101

-3

-395

-499

-3

-21

-24

-1,222

-712

2,996

262

103

3,412

696

401

1,139

1,592

106

1,763

6,314

8,179

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

The average effective interest rate on loans to
the on-trade was 3.2% (2019: 4.5%).

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.

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.

Receivables included in the statement of financial position

Weighted
average
loss rate

25%

42%

87%

13%

2020

10%

50%

Receivables from sales of goods and services

On-trade loans

Other receivables

Operating receivables

Prepayment for acquisition

Total receivables

17%

2019

Receivables from sales of goods and services

On-trade loans

Other receivables

Total

Non-
current

Current

Total

Receivables

Trade
receivables

Other
receivables

826

178

1,004

501

1,505

3,412

313

3,725

1,585

3,725

1,585

975

204

4,889

450

1,179

5,339

1,661

3,412

1,139

1,763

6,314

501

6,815

4,889

1,425

1,865

8,179

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 1.5 (CONTINUED)
TRADE RECEIVABLES
AND ON-TRADE
LOANS

OTHER RECEIVABLES
Other receivables primarily comprise VAT and
similar government receivables, interest
receivables and other financial receivables,
which are associated with low risk. The credit
risk related to other receivables remains almost
unchanged compared with previous years, as
they are less impacted by the COVID-19
pandemic.

On-trade loans recognised in other operating
activities, net

DKK million

2020

2019

1.5.1 CREDIT RISK
In 2020, receivables not past due amounted
to 74% (2019: 77%) of total gross receivables.
The closure of on-trade businesses and other
COVID-19 restrictions are impacting our
customers, increasing in particular the past-due
share of gross loans to on-trade customers
to 51% (2019: 29%). Total impairment losses
on trade loans were DKK 499m (2019:
DKK 214m).

The past-due share for trade receivables has
increased from 21% to 23%.

The credit risk is being closely managed in the
markets and assessed in light of the changing
restrictions, and the COVID-19 impact on the
global risk pattern is being evaluated at Group
level.

government restrictions in response to the
COVID-19 pandemic.

This makes our customers extremely vulnerable
and dependent on ongoing government support
in the form of subsidies and extended payment
terms.

The increased credit risk on both trade
receivables and on-trade loans already seen
across all markets in 2020 is expected to
continue into 2021.

The estimated impairment losses consider
the expected impact both from the continuing
restrictions and when government financial
support schemes and extended payment terms
come to an end when markets reopen.

The distribution of receivables broken down by
country is affected by market-specific changes
in payment patterns. For receivables from sale
of goods and services, the distribution is
furthermore impacted by the amounts of
receivables sold.

The relative share of receivables in the UK has
increased following the acquisition of Marston’s
brewing activities. The overall level of
receivables sold is similar to 2019.

Interest and amortisation of
on-trade loans

Losses and write-downs on
on-trade loans

On-trade loans, net

-254

-204

-31

Throughout the year and continuing into 2021,
our customers in most markets were impacted
by lockdowns, full or partial closure of on-
trade businesses, restrictions on cultural and
sports activities, social distancing and other

RECEIVABLES FROM SALES OF GOODS
AND SERVICES
(BROKEN DOWN BY COUNTRY)

ON-TRADE LOANS
(BROKEN DOWN BY COUNTRY)

2020 (2019)

Development in impairment losses on receivables

DKK million

2020

Impairment at 1 January

Impairment losses recognised

Realised impairment losses

Reversed impairment losses

Transfer

Foreign exchange adjustments

Impairment at 31 December

Receivables
from sales of
goods and
services

-477

-323

-71

-699

On-trade
loans

Other
receivables

-214

-317

-25

-7

-499

-21

-2

-13

-24

2019

Total

-654

-187

-25

Total

-712

-642

154

-91

-1,222

-712

Russia 14% (14%)

Sweden 10% (8%)

France 27% (29%)

Switzerland 24% (27%)

UK 10% (4%)

France 6% (8%)

Norway 6% (6%)

Poland 5% (3%)

Denmark 5% (5%)

Other 44% (52%)

Germany 23% (20%)

UK 18% (16%)

Sweden 8% (9%)

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

previous years expected credit losses were applied to
on-trade loans.

ACCOUNTING
POLICIES

Expected credit losses are assessed for portfolios of
receivables based on customer segments, historical
information on payment patterns, terms of payment,
concentration maturity, the impact of continuing
COVID-19 restrictions and the expected impact of
government schemes coming to an end when
markets reopen. The expected impact includes the
risk of insolvencies due to lack of liquidity when the
extended government payment terms cease. 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 on 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 they
cannot readily be used again.

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 1.5 (CONTINUED)
TRADE RECEIVABLES
AND ON-TRADE
LOANS

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. Many
customers are currently dependent on government
subsidies and support in the form of extended
payment terms. The credit risk has thereby increased
significantly during 2020 and is expected to continue
to increase into 2021.

At year-end 2020, management has therefore
assessed the lifetime expected credit losses for both
trade receivables and on-trade loans, while in

SECTION 2

ASSET BASE
AND RETURNS

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

118.8bn

TOTAL ASSETS (DKK)
Total assets decreased by DKK 4.2bn, mainly
due to a decrease in intangible assets and
property, plant and equipment, which was partly
offset by an increase in cash and the acquisition
of Marston’s brewing activities.

Intangible assets amounted to DKK 66.1bn at
31 December 2020 (2019: DKK 70.0bn), and
were impacted by the depreciation of the
Russian rouble and the impairment of a brand in

Cambodia, and partly offset by the purchase of
the Brooklyn brand rights and goodwill from the
Marston’s acquisition.

Property, plant and equipment decreased by
DKK 1.3bn to DKK 26.3bn (2019: DKK
27.6bn), mainly impacted by depreciation and
changes in foreign exchange rates.

Current assets increased by DKK 1.0bn to DKK
19.0bn. The increase was mainly driven by an
increase in cash of DKK 2.9bn and partly offset
by lower receivables and inventories.

3.6bn

CAPEX (DKK)
CapEx, excluding the purchase of the Brooklyn
brand rights, declined by DKK 1.0bn due to lower
investment in sales CapEx, fewer returnable glass
bottles due to lower demand, less need for
capacity expansions in draught lines, and general
cancellation and postponement of projects that
are not business critical at a time when the Group
is impacted by the COVID-19 pandemic. CapEx
to amortisation and depreciation, excluding right-
of-use assets, decreased to 90% (2019: 111%).
Including purchase of the Brooklyn brand rights,
the ratio amounts to 110%.

8.9%

ROIC
Return on invested capital (ROIC) increased by
10bp to 8.9%, positively impacted by the lower
invested capital and a lower effective tax rate,
which more than offset the lower profitability.
ROIC excluding goodwill increased by 80bp
to 23.2%.

ASSET BASE (DKKbn)

7.6

- 8.2

97.6

- 4.3

- 0.4

92.3

CAPEX* AND AMORTISATION/
DEPRECIATION (DKKbn)

RETURN ON INVESTED CAPITAL
(% 12-MONTH AVERAGE)

5.0

4.0

3.0

2.0

8.0%

7.0%

6.0%

5.0%

CapEx
Amortisation and depreciation
CapEx/revenue

*Excluding the purchase of the Brooklyn brand rights.

ROIC

ROIC excl. goodwill

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 2.1
SEGMENTATION OF
ASSETS AND
RETURNS

Both acquisitions had a limited impact on
average invested capital, as Carlsberg
Marston’s Brewing Company has only been
included for two months and the Brooklyn
brand rights for six months.

The impact on total assets from fluctuations in
the Russian rouble was a decrease of DKK
7.5bn (2019: increase of DKK 4.0bn).

Not allocated comprises supporting companies
without brewing activities and eliminations of
investments in subsidiaries, receivables and
loans. Invested capital increased following the
acquisition of the Brooklyn brand rights and
the prepayment for the acquisition of
Wernesgrüner Brewery.

Geographical allocation of non-current assets

At year-end, invested capital was down by
DKK 4.6bn, primarily due to the depreciation of
the Russian rouble. The decrease was partly
offset by the acquisition of Marston’s brewing
activities, which increased consolidated assets
by DKK 3.3bn, and by the acquisition of the
Brooklyn brand rights.

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.

DKK million

Denmark
(Carlsberg A/S'
domicile)

Russia

China

Other countries

Total

2020

2019

4,260

18,509

14,320

59,459

96,548

3,472

24,518

14,569

59,439

101,998

ACCOUNTING ESTIMATES
AND JUDGEMENTS

The calculation of return on invested capital (ROIC)
uses operating profit before special items adjusted for
tax based on 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

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.

Cash and cash equivalents

-8,093

-5,222

Invested capital

DKK million

Total assets

Less

Tax assets

Financial receivables,
hedging instruments and
receivables sold

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

2020

2019

118,816

123,063

DKK million

-1,767

-1,938

2020

Invested capital

1,904

1,899

110,860

117,802

-16,598

-17,149

Invested capital excl. goodwill

Acquisition of property, plant and equipment and
intangible assets

Amortisation and depreciation

Impairment losses

Return on invested capital (ROIC)

-1,276

-1,545

ROIC excl. goodwill

-4,322

-5,389

2019

-7,123

-7,557

-29,319

-31,640

81,541

86,162

Invested capital

Invested capital excl. goodwill

Acquisition of property, plant and equipment and
intangible assets

-50,492

-53,130

Amortisation and depreciation

Impairment losses

31,049

33,032

Return on invested capital (ROIC)

Invested capital, average

82,227

86,952

ROIC excl. goodwill

Western
Europe

41,795

19,151

1,474

2,095

9.4%

20.2%

Asia

18,045

2,682

1,395

1,499

292

15.8%

88.8%

Eastern
Europe

20,915

8,430

552

654

7.0%

17.4%

Not
allocated

Beverages,
total

Non-
beverage

80,761

30,269

965

4,386

4,326

357

9.0%

24.4%

780

Carlsberg
Group,
total

81,541

31,049

4,396

4,336

357

8.9%

23.2%

39,299

18,372

20,464

4,110

27,193

11,344

-2,347

84,609

31,479

1,553

86,162

33,032

2,100

2,025

11.5%

23.7%

1,539

1,450

14.2%

67.5%

602

710

5.8%

13.9%

330

319

4,571

4,504

121

8.9%

23.1%

4,592

4,512

121

8.8%

22.4%

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

In 2020, the Group recognised reversal of
impairment losses of DKK 2m (2019: DKK 3m)
in Eastern Europe relating to assets that have
been brought back into production.

With the exception of the Angkor brand, the
assessment has not identified any indication of
impairment of non-current assets as a result of
the COVID-19 pandemic.

SECTION 2.2
IMPAIRMENT

2.2.1 RECOGNISED IMPAIRMENTS
In 2020 and 2019, the impairment tests of
goodwill and brands with indefinite useful life
were prepared at the reporting date.

Impairment losses of DKK 200m relating to the
Angkor brand (Cambodia), a minor local brand
of DKK 31m, other intangible assets of DKK
4m and DKK 124m (2019: DKK 124m) relating
to property, plant and equipment have been
recognised. The impairment loss on the Angkor
brand is due to a significant decline in volumes
impacted by COVID-19 restrictions in the
market.

In 2019, 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.

Impact of COVID-19
The COVID-19 pandemic and the consequent
impact on volumes, earnings and cash flows
indicate possible impairment of non-current
assets.

The Group has carefully assessed the expected
recovery from the pandemic in terms of both
volumes and earnings. Since the beverage
industry is resilient and volumes have to some
extent shifted from on-trade to off-trade, it is
expected that these will shift back to the on-
trade and earnings return to the level before
the pandemic. The expected timing and speed
of the recovery differ from market to market,
depending on the extent of government
restrictions as well as consumer behaviour.

Impairment of brands and other non-current assets

DKK million

2020

2019

Brands and other intangible assets

Brands

Other intangible assets

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

231

235

124

-2

122

357

307

111

-3

108

121

Significant amounts of goodwill and brands
Goodwill and brands with indefinite useful life
relating to the acquisitions of Baltika
Breweries, Kronenbourg, Chongqing Brewery
Group and the 40% non-controlling interest in
Carlsberg Breweries A/S each accounted for
10% or more of the total carrying amount of
goodwill and brands with an indefinite useful
life at the reporting date.

Goodwill from these acquisitions has been
allocated to CGUs based on the geographical
segmentation.

The international brands acquired with the 40%
non-controlling interest in Carlsberg Breweries
A/S and the Baltika brand are individually
material and specified in section 2.2.3.

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.

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. The Group
gained control of Marston’s brewing activities in 2020
and of the Acrospires activities in 2019. The goodwill
recognised on these acquisitions was allocated to the
Western Europe 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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 2.2 (CONTINUED)
IMPAIRMENT

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.

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 brewery
closures. In 2020, the assessment also included the
impact of the COVID-19 pandemic.

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

2020

22,644

15,363

12,485

2019

20,927

16,354

15,849

50,492

53,130

Estimating expected cash flow involves
developing multiple probability-weighted
scenarios to reflect different outcomes in terms
of timing and amount. Measurement of the
forecast period growth rates reflects risk
adjustments made to calculate the expected
cash flows.

Key assumptions

2020

Western Europe

Asia

Eastern Europe

Forecast
cash flow
growth

Terminal
period
growth

Pre-tax
discount
rate

-5%

-14%

0.0%

1.0%

4.0%

1.5%

4.1%

6.7%

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 particular uncertainty related to the
continued impact on earnings and cash flow
from the COVID-19 pandemic, the time and
speed of the recovery, 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. 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. Consumption is

generally resilient, but the on-trade tends to
suffer in a weak macroeconomic environment.
In 2020 however, the region suffered as a
result of lockdowns across markets due to
COVID-19. These will continue into 2021 but
are not expected to have a significant long-
term effect.

In the short term, the focus will be on
recovering and regaining ground after the
COVID-19 pandemic, and secondly 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 SAIL’22 initiatives.

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
generally characterised by a strong traditional
outlet segment but with the modern outlet
segment growing in most markets.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 2.2 (CONTINUED)
IMPAIRMENT

In 2020, markets in the region were impacted
by COVID-19 at different times and to
different extents, with some markets already
seeing a strong rebound in the second half of
the year.

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 67% and 20%
respectively of regional volumes.

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 beer
boutiques, which is estimated to account for
around 20% of the market.

The region saw limited impact from COVID-19
due to the low on-trade exposure.

The competitive environment has been
challenging in recent years, particularly in
Russia, which has seen an increased focus on
volume. To offset previous years’ volume
declines caused by the focus on value in this
market, the Group chose to focus more on

volume, which resulted in significant volume
growth in 2020. 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 slightly lower
than currently observed in the market,
although still with some volatility.

NEW SEGMENTATION FOR 2021
As described in section 9.5, the Group’s
segmentation and regional split of entities
changed as of 1 January 2021, and the
allocation of CGUs changed accordingly. This
change will not have any impact on the
conclusion of the impairment test of goodwill.

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 budget and plans for 2021-
2023 take a cautious view of the extent and speed of
the recovery from the COVID-19 pandemic.

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.

uncertainty regarding the recovery from the
pandemic.

The risk-adjusted cash flows are discounted using a
discount rate that reflects 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 take into account
events or circumstances that are relevant 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.

Impact of COVID-19
For 2020, the current and expected future impact of
the COVID-19 pandemic has been carefully
considered. The beverage industry is generally
resilient, and it is expected that volumes and earnings
will recover to pre-pandemic levels within the next
few years. The decline in earnings in 2020 is
therefore not expected to continue in the long term.

However, to avoid overlooking any long-term impact,
additional risk adjustments have been made for the

Likewise, any impact on the development in volumes,
sales prices, input cost and operating investments has
been considered. Such impact primarily relates to the
expected timing of a given development when this
has been slowed down by the pandemic.

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. If relevant, the projections are
adjusted for the expected changes in the level of
premiumisation. No changes in market share 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
and of macroeconomic trends, are also considered in
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

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 2.2 (CONTINUED)
IMPAIRMENT

otherwise. No changes to duties in the short or
medium term are taken into consideration unless
there is a firm plan to introduce changes.

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 economic growth. The projected growth
rates and the applied discount rates are compared to
ensure a sensible correlation between the two.

In 2020, significant brands represented 55%
(2019: 60%) of the total carrying amount of
brands with indefinite useful life. The decrease
in the carrying amount of the Baltika brand
compared with 2019 is due only to the
depreciation of RUB.

Other brands comprise a total of 19 brands
(2019: 18 brands) that individually are not
material compared with the total carrying
amount.

BALTIKA BREWERIES
Despite COVID-19, the Russian beer market
grew slightly again in 2020, due to the
relatively small on-trade sector and supported
by very favourable weather during the summer.

Showing a positive trend in 2020, the Baltika
brand has performed broadly in line with the
growth projections made when the expected
future growth for the brand was reassessed
when the brand was impaired in 2017.

ANGKOR BRAND
The Angkor brand was recognised in
connection with the acquisition of Cambrew
Brewery, Cambodia, in 2018.

Following the acquisition, the volumes have not
developed as expected due to failed attempt to

relaunch the brand combined with the impact
of COVID-19.

The long-term expectations therefore remain
significantly below the expectations at the time
of acquisition, which is why the brand has been
impaired by DKK 200m to DKK 86m.

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

2.2.3 IMPAIRMENT TEST OF BRANDS

Brands with indefinite useful life

Key assumptions

DKK million

Baltika brand

International brands

Significant brands

2020

4,876

3,000

7,876

2019

6,402

2020

3,000

9,402

Baltika brand

International brands

Average
revenue
growth

4.4%

1.1%

Terminal
period growth

Pre-tax
discount rate

Post-tax
discount rate

4.0%

1.4%

11.3%

3.7%

10.0%

3.6%

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 their commercial strength
– such as market share and segment position – the
forecast takes into consideration the demographics of
the primary markets, including expected
developments 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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 2.2 (CONTINUED)
IMPAIRMENT

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 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.

In 2020, the current drop in revenue due to the
COVID-19 pandemic and the expected recovery from
this have been carefully considered. As the beverage
industry is generally resilient, the decline in revenue in
2020 is expected to have only a short-term impact.
Revenue is expected to recover to pre-pandemic
levels in the medium and long term. The timing of the
recovery has been carefully considered, particularly
for brands with lower headroom to the carrying
amount.

Tax benefit
The theoretical tax benefit applied in the test uses tax
rates and amortisation periods based on current
legislation. The impairment test applies tax rates in
the range of 15-31% 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.

In 2020, the royalty rate for one of the brands was
adjusted downwards from 15% to 13% due to
increased competition in the market and declining
margins.

Royalty rates

International, premium and
speciality beers

Strong regional and national brands

Local and mainstream brands

3.5-13.0%

3.0-5.0%

2.0-3.5%

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.

In 2020, observable interest rates and inflation have
normalised to the level expected by key international
financial institutions. The observable risk-free interest
and inflation have therefore been applied in the
impairment test for 2020.

The Group continues to monitor market
developments and compare these with the
expectations of key international financial institutions
to determine if the observable data can be applied.

The use of expected future interest rates in previous
years in lieu of appropriate observable interest rates
did not impact the conclusion of the impairment test
because the relationship between discount rates and
growth rates (the real interest rate) was 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.

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 used to calculate net
present value of the cash flows in the terminal period
has been adjusted to incorporate an interest rate that
is at least equal to the expected rate of inflation.

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
2020. 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 no potential impairment had been
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.

SECTION 2.2 (CONTINUED)
IMPAIRMENT

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 2015 for the Baltika brand, 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, in both 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.

The sensitivity tests were completed with all
other assumptions 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.

Interest rates in Western Europe have been low
for several years and are currently lower than
inflation. An increase in the interest rates
without a corresponding change in inflation
would result in a lower recoverable amount for
brands and could potentially lead to
impairment. Management considers the risk of
a significant write-down to be very low.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

result in a reduction in the recoverable amount
of DKK 1.3bn.

Angkor brand
As the Angkor brand was written down to the
recoverable amount in 2020, a reasonably
possible negative change in the key
assumptions could lead to further impairment.

Following the impairment, the carrying amount
of the brand amounts to DKK 86m. Any
increase in the risk-free interest rate or
decrease in the terminal growth rate would
therefore result in a minor additional
impairment.

At 31 December 2020, the carrying amount of
the Baltika brand was DKK 4,876m (2019:
DKK 6,402m). The decline in the carrying
amount is due to the depreciation of RUB.

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 level (2.7%), 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 0.7bn, and a 1
percentage point decrease in the terminal
growth rate would result in a reduction in the
recoverable amount of DKK 0.3bn. The
combined effect of a 1 percentage point
negative change in the interest rate, the
terminal growth rate and the average growth
rate in the forecast period (year on year) would

Sensitivity test

DKKbn

∆

Baltika brand

Average
forecast
growth rate

Terminal
period
growth rate

Risk-free
interest rate

-1 %-point

+1 %-point

-0.5

-0.3

-0.7

SECTION 2.3
INTANGIBLE ASSETS
AND PROPERTY,
PLANT AND
EQUIPMENT

DKK million

2020

Cost

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 2020 CONSOLIDATED FINANCIAL STATEMENTS

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

54,748

27,548

4,967

87,263

18,978

30,595

15,760

65,333

152,596

1,812

804

-4,496

-4,296

52,064

24,056

245

-66

-6

-173

4,967

1,812

1,049

-66

-6

-8,965

81,087

-46

1,572

50,492

231

-2,417

9,427

14,629

-42

167

-127

4,027

940

-42

187

235

-2,590

15,026

66,061

634

224

-603

1,049

-1,054

19,228

8,258

-464

653

-299

8,165

11,063

258

1,781

-846

-1,222

-2,087

28,479

18,827

-815

1,448

-1,399

18,155

10,324

373

1,818

-1,392

195

-1,140

15,614

10,641

-1,253

2,048

-765

10,702

4,912

1,265

3,823

-2,841

-4,281

63,321

3,077

4,872

-2,907

-13,246

144,408

37,726

54,962

-2,532

4,149

122

-2,463

37,022

26,299

-2,574

4,336

357

-5,053

52,048

92,360

178

942

207

415

396

1,382

396

1,382

Amortisation, depreciation and impairment losses

Amortisation, depreciation and impairment losses at 1 January

1,618

11,593

4,025

17,236

SECTION 2.3 (CONTINUED)
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 2020 CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets

Property, plant and equipment

Asset base

Goodwill

Brands

Other
intangible
assets

Total

Land and
buildings

Plant and
machinery

52,752

25,028

5,683

83,463

52,752

25,028

5,683

83,463

301

1,974

2,219

118

-925

327

118

-925

4,277

17,321

1,005

18,326

424

-873

515

586

28,960

28,983

115

2,139

-1,028

-680

1,066

Other
equipment,
fixtures and
fittings

14,197

564

14,761

2,448

-2,011

156

402

60,478

1,592

62,070

119

5,011

-3,912

-9

2,054

54,748

27,548

4,967

87,263

18,978

30,595

15,760

65,333

Total

1,618

53,130

1,261

11,593

15,955

4,467

-914

405

-3

4,025

942

16,378

-914

426

-3

1,336

17,236

70,027

7,779

-434

624

244

8,258

10,720

17,447

-884

1,420

-16

796

18,827

11,768

10,131

-1,825

2,042

275

10,641

5,119

35,357

-3,143

4,086

108

1,315

37,726

27,607

167

1,013

227

469

402

1,508

402

1,508

143,941

1,592

145,533

446

5,129

-4,837

-6

6,331

152,596

51,735

-4,057

4,512

121

2,651

54,962

97,634

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

Property, plant and equipment under
construction amounted to DKK 1,121m (2019:
DKK 1,514m). The decrease mainly relates to
the new central office in Copenhagen being
ready for use on 1 March 2020. 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.

At 31 December 2020, the carrying amount of
right-of-use assets amounted to DKK 1,382m.
During the year, additions amounted to DKK
476m and depreciation to DKK 396m.

Lease expenses recognised in the income
statement, relating to short-term leases and
leases of low-value assets, amounted to DKK
44m. Such contracts comprise the lease of
copy and printing machines, coffee machines,
small IT devices and similar equipment.

For disclosures of the interest expenses and
lease liabilities, please refer to sections 4.1,
4.4.1 and 4.7.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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 41m (2019: DKK 56m).

ACCOUNTING ESTIMATES
AND JUDGEMENTS

Useful life 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
costs of service and insurance. If these costs are not
objectively accessible, the Group estimates the costs
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

2020

235

422

2019

209

171

439

2020

2,666

1,249

284

4,271

2019

2,591

1,267

258

Gain/loss on disposal of assets

DKK million

Gain on disposal of property, plant and equipment and intangible assets

Loss on disposal of property, plant and equipment and intangible assets

4,194

Total

2020

-23

2019

-34

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 2.3 (CONTINUED)
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 acquired brand
rights is accounted for using the accumulated cost
approach if the total consideration includes an earn-
out dependent on the brands’ future performance.

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
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.

The expected useful life is as follows:

Brands with
finite useful life Normally 20 years

Software

Delivery rights

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

Customer
agreements/
relationships

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

8-15 years

8 years

5 years

5-8 years

3-10 years

3-5 years

Not depreciated

Impairment
Impairment losses of a non-recurring nature are
recognised under special items.

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 consists of 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.

SECTION 3

SPECIAL ITEMS
AND PROVISIONS

700m

SPECIAL ITEMS, INCOME
(DKK)
Impacted by reversal of provisions made in
purchase price allocations in previous years.

SECTION 3.1
SPECIAL ITEMS

SPECIAL ITEMS, INCOME
In 2020, the Group recognised reversal of
provisions made in purchase price allocations in
a prior year (DKK 586m) and a gain on
disposal of the last part of the former brewery
site in Hamburg, Germany (DKK 62m).

-947m

SPECIAL ITEMS, EXPENSES
(DKK)
Primarily impacted by restructurings across
the Group and write-down of the Angkor
brand and brewery equipment in
Cambodia.

In 2019, the Group recognised gains on the
disposal of a brewery site in Trondheim,
Norway, and the former brewery site in
Hamburg, Germany.

SPECIAL ITEMS, EXPENSES
In 2020 and 2019, the Group carried out
various restructuring projects as part of the
continued focus on cost and efficiency
initiatives.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

initiated. The restructuring projects entailed
changes within almost all functions, including
termination of employees.

In addition, costs incurred to ensure the health
and safety of our employees, such as personal
protective equipment, hand sanitiser and

masks, and donations to local communities
during the pandemic have been recognised as
special items. These costs are considered to be
by nature non-recurring and collectively
significant to the Group’s performance.

Special items

DKK million

Special items, income

Reversal of provisions made in purchase price allocations in a prior year

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

Total

The COVID-19 pandemic had a negative
impact on the Group’s performance in 2020,
with government impositions such as
lockdowns, travel restrictions, limited social
gatherings and social distancing resulting in the
closure or reduced operation of on-trade
outlets and other businesses. To ensure that
the Group is fit for the post-COVID-19 reality,
a programme to reset the business was

Special items, expenses

Impairment of brands, cf. section 2.2

Impairment of property, plant and equipment

Reset, other restructurings and provisions

Provision related to disposal of real estate

COVID-19, personal protective equipment and donations

Adjustment of contingent consideration

Costs related to acquisition of entities etc.

Total

Special items, net

2020

2019

586

700

-231

-74

-419

-69

-29

-125

-947

-247

1,061

1,064

-6

-441

-110

-6

-563

501

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 3.1 (CONTINUED)
SPECIAL ITEMS

The year was also impacted by write-downs,
primarily of the Angkor brand and brewing
equipment in Cambodia due to a significant
decline in volumes following an unsuccessful
attempt to relaunch the brand coupled with the
impact of COVID-19 restrictions in the market.

In 2019, special items also included an increase
in provisions retained by the Group on disposal
of a former brewery site in previous years.

ACCOUNTING ESTIMATES
AND JUDGEMENTS

ACCOUNTING
POLICIES

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.

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, significant
provisions in relation to certain disputes and lawsuits,
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.

Impact of special items on operating profit

DKK million

2020

2019

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

-111

-305

-307

668

-192

-247

-296

-77

1,061

-242

501

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.

The restructuring provision in 2020 of DKK
274m primarily related to Reset for the future.
Other restructurings mainly relates to
Kronenbourg, Ringnes, Carlsberg Sverige and
certain local supply companies.

Other provisions of DKK 3,846m related to
ongoing disputes and lawsuits, profit sharing in
France and employee obligations other than
retirement benefits. The provision has been
impacted by reversal of provisions made in
purchase price allocations in previous years, as
described in section 3.1, and reversal of
provisions in relation to real estate and other
contractual obligations that did not materialise,
in total DKK 1,136m.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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.

ACCOUNTING ESTIMATES
AND JUDGEMENTS

ACCOUNTING
POLICIES

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 relies on
external legal advice and established precedents.

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.

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.

Provisions

DKK million

Provisions at 1 January 2020

Additional provisions recognised

Used during the year

Reversal of unused provisions

Transfers

Discounting

Foreign exchange adjustments etc.

Provisions at 31 December 2020

Recognised in the statement of
financial position

Non-current provisions

Current provisions

Total

Restructurings

311

188

-198

-22

-14

274

194

274

Onerous
contracts

400

178

-28

-62

-16

476

443

476

Other

4,989

357

-266

Total

5,700

723

-492

-1,136

-1,220

-150

3,846

-180

4,596

2,796

1,050

3,846

3,319

1,277

4,596

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

Although no final rulings have been made in
the ongoing cases, there is still 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, in excess of
items recognised in the statement of financial
position.

GUARANTEES AND COMMITMENTS
The Group has issued guarantees for loans etc.
raised by third parties (non-consolidated
entities) of DKK 304m (2019: DKK 395m). In
2020 and 2019, 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, and in
connection with on-trade loans. 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.

SECTION 3.3
CONTINGENT
LIABILITIES

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.

In the ordinary course of business, the Group is
party to certain lawsuits, disputes etc. of
varying content and scope, some of which are
referred to below. The resolution of these
lawsuits, disputes etc. is associated with
uncertainty, as they depend on relevant
applicable proceedings, such as negotiations
between the parties affected, government
actions and court rulings.

In 2020, the German Supreme Court overruled
the Higher Regional Court of Düsseldorf, which
in 2019 had ruled in favors of Carlsberg
Deutschland in relation to the competition case
from 2014, in which 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. The German
Supreme Court referred the competition case
back to a new Senate for full new proceedings.

In 2018 and 2019, the Group's associate Super
Bock in Portugal received three separate
statements of objections from the local
competition authority. Two of these cases are
still awaiting a final decision, whereas the third
case has been dropped by the Portuguese
competition authority without any consequence
for Super Bock.

A private consumer protection organisation in
Portugal has made public that it intends to
raise a civil claim of EUR 400m against Super
Bock for compensation to Portuguese
consumers for alleged harm on account of
Super Bock’s alleged anticompetitive practices.

In 2018, a dawn raid was conducted at the
Group’s subsidiary in India. At 31 December
2020, the case was still ongoing, and Carlsberg
India is still awaiting the final decision of the
competition authorities, which could entail a
fine.

The Group is party to arbitration proceedings in
Singapore with a partner who is the non-
controlling shareholder of the Group entities in
question. The dispute relates to the
Shareholders’ Agreement between Carlsberg
and the partner.

SECTION 4

FINANCING COSTS, CAPITAL
STRUCTURE AND EQUITY

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

21.3bn

NET INTEREST-BEARING DEBT
(DKK)
At 31 December 2020, gross financial debt
amounted to DKK 30.3bn (2019: DKK 25.0bn).
Net interest-bearing debt was DKK 21.3bn, an
increase of DKK 2.5bn versus year-end 2019.

The financial position was impacted by lower-
than-normal free cash flow due to the COVID-
19 impact on the business and the issue of two
bonds for a total of EUR 1bn.

The leverage ratio, measured as net interest-
bearing debt to operating profit before
depreciation, amortisation and impairment
losses, was 1.51x at year-end (2019: 1.25x).

CHANGES IN NET INTEREST-BEARING DEBT (DKKbn)

18.8

-10.9

2.4

0.1

3.1

3.5

2.9

0.8

0.2

0.4

21.3

2.9bn

SHARE BUY-BACK (DKK)
During 2020, the Company repurchased shares
worth DKK 2.9bn under the share buy-back
programmes initiated in 2019 and 2020.

43.4bn

EQUITY (DKK)
Equity amounted to DKK 43.4bn at 31
December 2020 (2019: DKK 46.0bn), DKK
39.3bn of which was attributable to
shareholders in Carlsberg A/S and DKK 4.1bn
to non-controlling interests.

The change in equity of DKK -2.6bn was the
result of the consolidated profit of DKK 6.8bn,
foreign exchange on translation of DKK 7.6bn,
the dividend payout of DKK 3.9bn, the share
buy-back of DKK 2.9bn, acquisition of entities
of DKK 1.0bn and non-controlling interests of
DKK 3.8bn.

The non-controlling interests were impacted by
the acquisition of 60% of Marston’s brewing
activities in the UK, the simultaneous disposal
of 40% of the Group's subsidiaries in the UK,

and the injection of the Group’s Chinese entities
into Chongqing Jianiang, cf. section 5.3.

-411m

NET FINANCIAL ITEMS (DKK)
Financial items, net, amounted to DKK -411m
against DKK -738m in 2019. Excluding
currency gains and fair value adjustments,
financial items, net, amounted to DKK -550m
(2019: DKK -650m), positively impacted by a
reduction in other financial expenses.

LEVERAGE RATIO (NIBD/EBITDA)

2.2

1.8

1.4

1.0

2016

2017

2018

2019

2020

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 4.1
FINANCIAL INCOME
AND EXPENSES

Interest income primarily relates to interest on
cash and cash equivalents measured at
amortised cost.

Foreign exchange gains, net, include fair value
adjustments of hedges and foreign exchange
gains. The fair value adjustment of hedges not
designated as hedging instruments amounted
to DKK -49m (2019: DKK 88m), cf. section
4.8. Foreign exchange gains amounted to DKK
188m (2019: DKK -176m).

Of the net change in fair value of cash flow
hedges transferred to the income statement,
DKK -30m (2019: DKK -102m) has been
included in revenue and cost of sales and DKK
-2m (2019: DKK 7m) in financial items.

FINANCIAL ITEMS, NET (DKKbn)

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

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
FX adjustments

2020

2019

139

114

373

-484

-160

-12

-129

-784

-411

-550

135

189

360

-519

-88

-256

-12

-241

-1,098

-738

-650

Financial items recognised in other comprehensive income

DKK million

2020

2019

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

Fair value adjustments of hedging instruments

Change in fair value of effective portion of cash flow hedges

Change in fair value of cash flow hedges transferred to the income statement

Change in fair value of net investment hedges

Total

-7,640

3,479

-7,640

3,485

103

198

-93

-325

-323

Financial items, net, recognised in other comprehensive income

-7,442

3,162

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 4.2
NET INTEREST-
BEARING DEBT

SECTION 4.3
CAPITAL
STRUCTURE

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.

Of the gross financial debt at year-end, 97%
(2019: 84%) was long term, i.e. with maturity
of more than one year.

Long-term and short-term borrowings
amounted to DKK 30.3bn at 31 December
2020 (2019: DKK 25.0bn). Long-term
borrowings totalled DKK 29.3bn (2019: DKK
20.9bn) and short-term borrowings totalled
DKK 1.0bn (2019: DKK 4.1bn). The increase
in long-term borrowings is mainly due to the
issue of a 10-year EUR 500m bond maturing
in March 2030 and a 7-year EUR 500m bond
maturing in June 2027. Both bonds were
issued to secure continued strong liquidity and
financial flexibility.

The difference of DKK 9.0bn between gross
financial debt and net interest-bearing debt
mainly comprised cash and cash equivalents
and on-trade loans.

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 2020, the leverage ratio was
1.51x (2019: 1.25x). The Group currently uses
share buy-back programmes to return excess
cash to shareholders.

The share buy-back programmes are initiated
based on a cautious evaluation of the Group’s
funding flexibility and credit resources
available. The size and duration of each
programme depend 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.

Net interest-bearing debt

Class A shares

Class B shares

Total share capital

Share capital

The Group generally intends to cancel treasury
shares that 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.

4.3.2 SHARE CAPITAL
At the Annual General Meeting on 16 March
2020, it was decided to reduce the share
capital of Carlsberg A/S by a nominal amount
of DKK 88,000,000 to a nominal amount of
DKK 2,963,136,120 by cancelling 4,400,000
of the B shares held by the Company, each
with a nominal value of DKK 20. The
cancellation was completed on 14 April 2020.
These shares had been repurchased as part of
the Company’s share buy-back programme
running from 6 February 2019 to 30 January
2020.

DKK million

2020

2019

Non-current borrowings

29,291

20,879

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

959

4,112

30,250

24,991

-8,093

22,157

-209

-618

-67

-5,222

19,769

-226

-668

-99

Net interest-bearing debt

21,263

18,776

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 2019

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

Cancellation of treasury
shares

-4,400,000

-88,000

-4,400,000

-88,000

31 December 2020

33,699,252

673,985

114,457,554

2,289,151

48,156,806

2,963,136

4.3.3 EQUITY
DIVIDENDS
The Group proposes a dividend of DKK 22.00
per share (2019: DKK 21.00 per share),
amounting to DKK 3,259m (2019:
DKK 3,204m). The proposed dividend has
been included in retained earnings at
31 December 2020.

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 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 4.3 (CONTINUED)
CAPITAL STRUCTURE

Dividends to be paid out in 2021 for 2020, net
of dividends on treasury shares held at 31
December 2020, will amount to DKK 3,192m
(paid out in 2020 for 2019: DKK 3,108m).

At 31 December 2020, dividends to non-
controlling interests of DKK 51m (2019: DKK
41m) were payable.

SHARE BUY-BACK AND TREASURY SHARES
As of 31 January 2020, the Company had
repurchased 393,501 B shares under the share
buy-back programme initiated in 2019 at a
total purchase price of DKK 0.4bn.

On 4 February 2020, the Company announced
its intention to continue the share buy-back
programme and repurchase shares worth DKK

Equity (DKKbn)

5bn over a 12-month period. In the first
tranche, which was finalised on 7 August 2020,
the Company repurchased 2,897,021 B shares
at a total purchase price of DKK 2.5bn. Due to
the continued uncertainties related to COVID-
19, and the acquisitions of Marston’s brewing
activities and the Brooklyn brand rights, the
Board decided not to initiate the second
tranche of the share buy-back.

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.

Transactions with shareholders
in Carlsberg A/S

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).

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.

DKK million

Dividends paid to
shareholders

Share buy-back

Total

2020

2019

-3,093

-2,900

-5,993

-2,738

-4,100

-6,838

Transactions with non-controlling interests

DKK million

Dividends paid to NCI

Consideration paid for
acquisition of NCI

Total

2020

-796

-81

-877

2019

-850

-1,670

-2,520

The acquisition of non-controlling interests in
2019 related to shares in Cambrew and
Carlsberg Ukraine, cf. section 5.3.

6.8

- 7.6

46.0

- 3.9

- 2.9

3.8

1.0

0.2

43.4

Treasury shares

Fair value,
DKKm

Shares of
DKK 20

Nominal
value, DKKm

Percentage of
share capital

1 January 2019

Acquisition of treasury shares

Used to settle share-based payments

31 December 2019

Acquisition of treasury shares

Cancellation of treasury shares

Used to settle share-based payments

99,453

4,518,999

-58,057

4,532

4,560,395

3,290,522

-4,400,000

-395,742

31 December 2020

2,979

3,055,175

2.0

90.4

-1.2

91.2

65.8

-88.0

-7.9

61.1

0.1%

3.0%

-0.1%

3.0%

2.3%

-2.9%

-0.3%

2.1%

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 4.3 (CONTINUED)
CAPITAL STRUCTURE

4.3.4 OTHER COMPREHENSIVE INCOME
Other comprehensive income has mainly been
impacted by a negative foreign exchange
adjustment from the depreciation of RUB.

4.3.5 FINANCIAL RISK MANAGEMENT
The Group’s activities mean it is exposed 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 will not as
a general rule 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
• Funding and 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

2020

Foreign exchange adjustments of foreign entities

Value adjustments of hedging instruments

Retirement benefit obligations

Other

Income tax

Total

2019

Foreign exchange adjustments of foreign entities

Value adjustments of hedging instruments

Retirement benefit obligations

Other

Income tax

Total

Currency
translation

-7,330

-18

-7,285

3,490

-325

3,185

Hedging
reserves

Retained
earnings

-1

-4

-9

Total

-7,330

195

-1

-4

-47

-14

-7,187

-570

3,490

-325

-570

-518

2,667

Non-
controlling
interests

Other
comprehensive
income

-310

-7,640

-17

-322

-5

-1

-3

198

-4

-64

-7,509

3,485

-323

-571

2,664

132

-20

112

SECTION 4.4
BORROWINGS
AND CASH

4.4.1 BORROWINGS
Non-current funding increased by DKK 8.4bn
due to the issue of a 10-year EUR 500m bond
maturing in March 2030 and a 7-year EUR
500m bond maturing in June 2027. Both
bonds were issued to secure continued strong
liquidity and financial flexibility.

Gross financial debt

DKK million

2020

2019

Changes in gross financial debt

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

Non-current

Issued bonds

Bank borrowings

Lease liabilities

Other borrowings

Total

Current

Bank borrowings

Lease liabilities

Other borrowings

Total

Total borrowings

Fair value

27,002

19,673

922

1,080

287

Other

1,165

External financing

Change in bank overdrafts

Increase in lease liabilities,
net

Other, including foreign
exchange adjustments and
amortisation

Gross financial debt
at 31 December

29,291

20,879

472

398

959

347

424

3,341

4,112

30,250

24,991

31,732

26,414

2020

2019

24,991

23,983

1,592

24,991

25,575

7,402

2,946

-5,598

1,155

-236

-3,264

3,264

-1,026

-414

181

5,060

-414

129

-935

-82

190

411

-53

30,250

24,991

An overview of issued bonds is provided in section 4.5.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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 353m at 31 December 2020 (2019: DKK
188m). The average interest rate on these
deposits was 2.7% (2019: 4.3%).

During 2020, the Group had an increased focus
on liquidity and maintaining sufficient cash at
bank to better protect against the uncertainties
and increased risks in relation to COVID-19.
Total cash at bank amounted to DKK 8,093m
in 2020 (2019: DKK 5,222m).

Cash and cash equivalents

DKK million

Cash and cash equivalents

Bank overdrafts

Cash and cash equivalents,
net

2020

8,093

-135

2019

5,222

-73

7,958

5,149

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 Group primarily enters into financial
instruments and transactions with the Group’s
relationship banks, i.e. banks extending loans
to the Group. Group Treasury manages and
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 8,093m (2019:
DKK 5,222m) represents the maximum credit
exposure related to cash and cash equivalents.

The credit risk on receivables is described in
section 1.5.1.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 4.5
INTEREST RATE RISK

The Group’s exposure to interest rate risk is
considered limited. At the reporting date, 127%
of the net financial debt consisted of fixed-rate
borrowings with interest rates fixed for more
than one year (2019:100%). As 110% of the
Group’s net debt is in EUR, the interest rate
exposure primarily relates to the development
in the interest rates for EUR.

The share of fixed-rate net financial debt in
CNY is negative (-78%) as the cash position
exceeds the total debt. For USD and EUR, the
share is positive (225% and 111% respectively)
as the cash position exceeds the current debt.

The interest rate risk is measured by the
duration of the net financial debt. The target is
to have a duration between three and eight
years. At 31 December 2020, the duration was
5.6 years (2019: 4.4 years). Interest rate risk is
mainly managed using fixed-rate bonds.

Net financial debt by currency

DKK million

Interest rate

SENSITIVITY ANALYSIS
It is estimated that a 1 percentage point
interest rate increase would lead to a decrease
in interest expenses of DKK 60m (2019: DKK
0m). The impact is due to the relatively high
portion of cash. 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
1,242m (2019: DKK 865m), 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 2019. The
Group did not enter into any new interest rate
swaps in 2020 or 2019.

2020

EUR

CNY

PLN

USD

CHF

RUB

Other

Total

2019

EUR

CNY

PLN

USD

CHF

RUB

Other

Total

Net financial
debt

24,298

-1,058

-29

119

113

-1,319

22,157

22,822

-1,770

-101

122

-1,377

19,769

Floating

-2,786

-1,884

-29

-149

113

-1,319

-6,021

3,072

-1,770

-101

122

-1,377

27,084

826

268

28,178

19,750

Fixed

Floating %

Fixed¹ %

Interest rate risk

-11%

178%

100%

-125%

100%

-27%

13%

100%

111%

-78%

225%

127%

87%

100%

DKK million

2020

Issued bonds

Average
effective
interest
rate

Interest
rate

Fixed for

Carrying
amount

Interest
rate risk

EUR 750m maturing 15 November 2022

EUR 500m maturing 6 September 2023

EUR 1,000m maturing 28 May 2024

EUR 500m maturing 30 June 2027

EUR 400m maturing 1 July 2029

EUR 500m maturing 11 March 2030

Total issued bonds

Total issued bonds 2019

Fixed

2.7%

0.7%

2.6%

0.5%

1.0%

0.7%

1.6%

2.0%

1-2 years

2-3 years

3-4 years

> 5 years

5,570

3,703

7,403

Fair value

3,691

Fair value

2,942

Fair value

3,693

Fair value

27,002

19,673

Bank borrowings and other borrowings

Floating-rate

Fixed-rate

Total bank borrowings and other borrowings

Total bank borrowings and other borrowings 2019

Floating

Fixed

1.1%

2.9%

< 1 year

> 1 year

2,072

Cash flow

Fair value

1,176

3,248

5,318

¹The percentage of net debt at fixed interests are above 100% in some currencies, as the total cash exceeds the
current debt. In some currencies the percentage of net debt at fixed interests is negative, as the total cash exceeds
the total debt.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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 2020, all adjustments of financial
instruments have been recognised in other
comprehensive income. Fair value adjustments
of loans designated as strategic intra-group
loans have also been recognised in other
comprehensive income.

The fair value of derivatives used as
net investment hedges recognised at
31 December 2020 amounted to DKK 84m
(2019: DKK -91m). The closing balance in the
equity reserve for currency translation of
hedges of net investments amounted to
DKK -1,611m (2019: DKK -1,628m). Positive
fair values of derivatives are recognised as
other receivables and negative values as other
liabilities.

Net investment hedges

Currency profile of borrowings

DKK million

Before and after derivative financial instruments

DKK million

2020

CHF

NOK

EUR

USD

CNY

Other

Total

Total 2019

Original
principal

119

190

Effect
of swap

1,477

619

After
swap

1,596

809

27,730

-6,327

21,403

495

864

852

30,250

24,991

1,689

1,833

709

2,184

2,697

1,561

30,250

24,991

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

2020

2019

2020

2019

-2,407

-1,500

-292

-318

2020

2019

-1,077

-27

-305

-273

-1,300

-135

3,000

3,773

3,000

3,335

-154

-28

2020

-29

-27

-105

-5

2019

-77

-63

-35

2020

2019

0.9176

0.9257

1.5145

1.5656

-50

6.9925

6.7148

-114

-8

-33

-325

0.6874

0.7398

1.6201

1.7346

Asset

Liability

Asset

Liability

-19

-1

104

-20

-11

-45

-14

-1

-91

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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
denominated 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.

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.

Exchange rate sensitivity - other comprehensive income

2020

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

0.6913

0.7078

1.6649

6.9217

0.0854

8.3212

N/A

-663

-668

-508

-456

-140

-111

-142

10%

-33

-25

-23

-14

-6

-7

-141

0.7383

0.7009

1.7015

6.7438

0.0991

8.3781

N/A

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 2020, net
interest-bearing debt increased by DKK 297m
(2019: decreased by DKK 14m) due to changes
in foreign exchange rates.

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 2020 illustrated in the tables. The
calculations have been made based on items
in the statement of financial position at
31 December 2020.

Exchange rate sensitivity - income statement

2020

DKK million

EUR/GBP

EUR/NOK

EUR/PLN

EUR/KZT

EUR/RUB

EUR/SEK

EUR/CHF

Total

2020

USD/RUB

USD/UAH

Total

EUR
receivable

EUR
payable

550

118

232

159

100

-348

-873

-238

-18

-71

-296

-174

USD
receivable

USD
payable

-1

EUR
cash

-483

586

367

274

-270

USD
cash

284

Gross
exposure

Exposure,
net of hedging

Change

Effect
on P/L

-281

-169

349

208

-59

-344

-281

-169

349

208

-59

-344

10%

Gross
exposure

Exposure,
net of hedging

283

Change

10%

-14

-8

-3

-17

Effect
on P/L

2019

Effect
on OCI

-34

-32

-26

-24

-29

-6

-1

-152

2019

Effect
on P/L

-6

-9

-1

2019

Effect
on P/L

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)

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

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.

SECTION 4.7
FUNDING AND
LIQUIDITY RISK

The Group's overall objective is to ensure
continuous access, at the right price, to the
financial resources needed for operations and
growth.

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 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.

DIVERSIFIED FUNDING SOURCES
The Group is diversifying its access to funding
to avoid relying on one single source of
funding.

At 31 December 2020, bonds accounted for
89% of the gross funding.

Committed credit facilities and credit resources available

DKK million

2020

Current

< 1 year

Closing rate

Average rate

Total current committed loans and credit facilities

2019

Non-current

6.7135

1-2 years

0.9654

2-3 years

7.4659

8.5218

3-4 years

4-5 years

0.0008

> 5 years

2020

6.8521

0.9284

7.4393

8.2378

0.0007

0.7053

1.6327

0.0820

0.7397

0.2142

2019

6.8712

0.9555

7.4697

8.7664

0.0008

0.7587

1.7548

0.1077

0.7155

0.2827

2020

6.9656

0.9452

7.4539

8.3838

0.0007

0.6958

1.6770

0.0915

0.7120

0.2438

0.7582

1.7377

0.1033

0.7049

0.2594

Total non-current committed loans and credit facilities

44,170

29,291

14,879

14,939

Cash and cash equivalents

Current portion of utilised credit facilities

Credit resources available (total non-current
committed loans and credit facilities less net debt)

8,093

-959

5,222

-4,112

22,013

16,049

Total
committed
loans and
credit
facilities

Utilised
portion of
credit
facilities

Unutilised
credit
facilities

2019
Unutilised
credit
facilities

2,145

959

1,186

1,531

6,730

3,959

7,701

6,730

3,959

7,701

14,954

14,879

14,939

10,826

uncertainty. In addition, Carlsberg issued a 7-
year EUR 500m bond in June, which was used
to repay the bank loan issued in March.

CREDIT RESOURCES AVAILABLE
The Group uses the term “credit resources
available” to determine the adequacy of access
to credit facilities.

The credit resources available include cash and
unutilised credit facilities with more than 12
months to maturity less utilised credit facilities
with less than 12 months to maturity and
uncommitted working capital facilities.

Net financial debt is used internally 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.

SECTION 4.7 (CONTINUED)
FUNDING AND
LIQUIDITY RISK

The Group still has access to a committed EUR
2bn revolving credit facility (RCF) maturing in
2025 that is currently not being utilised. In
addition, the Group has committed cash pool
bank overdraft facilities to cover the day-to-
day liquidity needs and uncommitted access to
the Euro Commercial Paper (ECP) market,
which provides short-term funding.

FUNDING STRATEGY AND REACTION TO
COVID-19
Since March 2020 and the first COVID-19
lockdowns in Western Europe, the Group has
maintained a central cash position of minimum
EUR 200m as a safety measure. In addition, a
special effort has been made to improve cash
flow forecasting, including introducing frequent
short-term cash flow updates.

In March, Carlsberg issued a 10-year EUR
500m bond and secured a EUR 500m bank
loan as a precaution against the market

Time to maturity for non-current borrowings

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2020, the Group had total
credit resources available of DKK 22,013m,
consisting of cash and cash equivalents of DKK
8,093m plus committed unutilised non-current
credit facilities of DKK 14,879m less utilisation
of current facilities of DKK -959m. Including
current credit facilities of DKK 1,186m, total
committed unutilised credit facilities amounted
to DKK 16,065m.

Credit resources available increased by DKK
6.0bn compared with 2019, primarily due to
the issuance of the two bonds for a total of
EUR 1.0bn. Both bonds were issued to secure
continued strong liquidity and financial
flexibility.

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.

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.

Maturity of financial liabilities

DKK million

2020

Contractual
cash flows

Maturity
< 1 year

Maturity
> 1 year
< 5 years

Maturity
> 5 years

Carrying
amount

Derivative financial instruments

Derivative financial instruments, payables

142

127

DKK million

2020

Issued bonds

Bank borrowings

Lease liabilities

Other non-current borrowings

Total

Total 2019

1-2 years

2-3 years

3-4 years

4-5 years

> 5 years

Total

Interest expenses

Non-derivative financial instruments

Gross financial debt

5,570

3,703

723

345

6,730

412

3,959

5,729

7,403

127

7,701

3,821

486

10,326

27,002

Trade payables and other liabilities

922

Contingent liabilities

1,080

Contingent considerations

287

Non-derivative financial instruments

55,548

19,739

24,682

11,127

10,826

29,291

Financial liabilities

7,465

3,452

20,879

Financial liabilities 2019

55,690

19,881

24,682

11,127

55,192

23,887

27,696

3,609

18,552

10,915

30,250

30,426

1,654

17,874

304

5,290

959

492

17,874

304

110

950

212

5,180

N/A

17,874

304

5,290

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 4.7 (CONTINUED)
FUNDING AND
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
gross financial debt totalled DKK 30,426m
(2019: DKK 25,144), whereas the total
carrying amount was DKK 30,250m (2019:
DKK 24,991m). The difference between these
amounts arises at initial recognition and is
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 2020.

The cash flow is estimated based on the
notional amount of the above-mentioned
borrowings and expected interest rates at
year-end 2020 and 2019. Interest on debt
recognised at year-end 2020 and 2019 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 2.5% (2019: 1%).

SECTION 4.8
DERIVATIVE
FINANCIAL
INSTRUMENTS

The Group enters into various derivative
financial instruments to hedge foreign
exchange and commodity risks, cf. sections 1.2
and 1.3, and seeks to apply hedge accounting
when this is possible. Hedging of future, highly
probable forecast transactions is designated as
cash flow hedges.

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 liabilities.

The impact on other comprehensive income
and the fair value of derivatives classified as
cash flow hedges is presented in the cash flow
hedge table.

Cash flow hedges comprise aluminium hedges,
where the hedged item is aluminium cans that
will be used in a number of Group entities in
2021. The hedging instrument is aluminium
swaps.

The impact on other comprehensive income
from other instruments relates to hedges of
Group entities’ exposure to changes in
aluminium prices.

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.

Cash flow hedges

DKK million

2020

Exchange rate instruments

Other instruments

Total

2019

Exchange rate instruments

Other instruments

Total

Other
comprehensive
income

Fair value
receivables

Fair value
payables

Fair value,
net

135

-21

-8

Other
comprehensive
income

Fair value
receivables

Fair value
payables

Fair value,
net

-60

-56

-24

-80

-56

-24

-80

Expected
recognition

Financial derivatives not designated as hedging instruments (economic hedges)

2021

-8

2020

-56

DKK million

2020

Exchange rate instruments

Ineffectiveness

Total

2019

Exchange rate instruments

-24

Ineffectiveness

-80

Total

Income
statement

Fair value
receivables

Fair value
payables

Fair value,
net

-47

-2

-49

-78

-13

-78

SECTION 4.8 (CONTINUED)
DERIVATIVE
FINANCIAL
INSTRUMENTS

As of 31 December 2020, the hedging reserve
within equity included DKK 843m in relation to
cash flow hedges for which hedge accounting is
no longer applied.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING ESTIMATES
AND JUDGEMENTS

ACCOUNTING
POLICIES

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 with 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.

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.

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 5

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITIONS, DISPOSALS,
ASSOCIATES AND JOINT VENTURES

Marston’s
brewing
activities

Forming the jointly owned entity Carlsberg
Marston’s Brewing Company by injection of
the Group’s UK brewing activities and the
brewing activities from Marston’s PLC.

China

Reorganisation of the Group’s Chinese
entities into the Chongqing Brewery Group.

Wernes-
grüner

Prepayment on the acquisition of
Wernesgrüner Brewery, Germany. The
acquisition completed 1 January 2021.

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, it often does so in collaboration with
a local partner. Such a partnership can take
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 or
expanding the activities in an existing market.

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 forge 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. The Group thus leaves the
controlling influence with the partner and
recognises the investment as an associate.

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 majority of the
voting rights. These investments are fully
consolidated subsidiaries, which are just as
important as other types of partnership for
success 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 associates and joint ventures are
consolidated in the financial statements using
the equity method. The accounting risks
associated with these entities are limited to
the investment made, the proportionate share
of the net profit 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.

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 the
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

Marston’s brewing activities
In October 2020, Carlsberg UK and Marston’s
PLC injected their respective brewing activities
into a jointly owned company named Carlsberg
Marston’s Brewing Company Limited.

Carlsberg is the controlling shareholder with a
shareholding of 60%.

The jointly owned company was formed to
strengthen the Group’s presence in the
important UK market through a stronger beer
portfolio. The calculated goodwill represents
staff competences and synergies from expected
optimisations of sales and distribution, supply
chain and procurement, possible product
innovations, the increase in market share and
access to new customers.

The total cost of the acquisition comprises the
cash consideration paid, a contingent
consideration and the fair value of the 40% of
Carlsberg UK businesses that were effectively
transferred to Marston’s PLC when the
Carlsberg entities were injected into the jointly
owned company.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

100

The purchase price allocation of the fair value
of identified assets, liabilities and contingent
liabilities is ongoing. Adjustments are therefore
expected to be made to several items in the
opening balance, including brands and
property, plant and equipment. The accounting
treatment of the acquisition will be completed
within the 12-month period required by IFRS.

Acquisition of Marston's brewing activities

DKK million

Consideration paid

Fair value of contingent consideration

Fair value of non-controlling shareholding
in Carlsberg UK transferred to the seller

Foreign currency exchange translation
difference

Total cost of acquisition

Acquired assets and liabilities

Intangible assets

Property, plant and equipment

Financial assets

Inventories

Trade and other receivables

Borrowings and lease liabilities

Trade payables

Other payables

Acquired assets and liabilities

Non-controlling interests

Acquired assets and liabilities attributable
to shareholders in Carlsberg A/S

2020

1,908

548

2,530

1,812

1,265

235

414

-174

-302

-307

3,009

-479

2,530

Other
In 2020, the Group adjusted a purchase price
allocation made in prior years due to an error
in the recognised fair value of land. The
adjustment reduced the recognised value of
land by DKK 273m and deferred tax by DKK
56m, and increased goodwill by DKK 217m.
The comparative figures have been restated
accordingly.

In 2019, the Group completed a minor
acquisition of DKK 18m.

ACQUISITION OF BRAND RIGHTS
In 2020, the Group acquired the Brooklyn
brand rights in our markets. The brand rights
are recognised as an intangible asset.

The acquisition is described in section 2.

ACQUISITION OF ENTITIES IN 2021
On 31 December 2020, the Group prepaid DKK
501m for the acquisition of Wernesgrüner
Brewery, Germany. The transaction has been
completed, and the entity will be fully
consolidated as of 1 January 2021. The
acquisition is not material to the Group’s
financial statements.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

101

ACCOUNTING ESTIMATES
AND JUDGEMENTS

cash flows associated with the brand, including the
related value of customer relations etc.

SECTION 5.2 (CONTINUED)
ACQUISITIONS
AND DISPOSALS

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
and received

DKK million

2020

2019

Cash consideration
received/paid, subsidiaries,
net

Prepayment for acquisition
of entities not completed at
the reporting date

Cash 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

-1,908

-18

-501

-2,401

-2,409

-41

-18

Cash flow from acquisition of shareholdings

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.

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.

Cash flow from acquisitions,
net, included in investing
activities

Consideration paid for
acquisition of non-
controlling interests

Total

-2,401

-41

-81

-1,670

-2,482

-1,711

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

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
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.

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 Marston’s brewing activities
Purchase price allocation
Management believes that the purchase price for
Marston’s brewing activities accounted for in the
consolidated financial statements reflects the best
estimate of the total fair value of the business. The
fair value of the contingent consideration is primarily
based on the expected development in market
conditions.

The provisional opening balance recognised in the
consolidated financial statements is based on the
carrying amounts at the time of injection of Marston’s
PLC’s brewing activities into a newly established
entity held by the joint venture.

The purchase price allocation of the identified assets,
liabilities and contingent liabilities will be completed
within 12 months of the acquisition. This is primarily
expected to impact the value of brands, property,
plant and equipment, trade loans and trade
receivables.

Brands
The value of the brands will be estimated using the
Group’s principle described above. It is expected that
significant brands will be assumed to have an
indefinite useful life.

Property, plant and equipment
The fair value and expected useful life of the brewery
equipment and related buildings of the six acquired
breweries will be determined with assistance from
leading external engineering experts in the brewery
industry.

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
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

Trade loans and receivables
The fair value of the trade loans and receivables will
be estimated in line with the Group’s principle for
assessment of credit risk and recognition of
impairment losses to reflect the amount that is
expected to be collected. The valuation will take into
consideration the expected increase in losses in the
on-trade segment due to the restrictions and
lockdowns under COVID-19.

Goodwill
Goodwill will be allocated to the CGU covering the
Western Europe region in line with the allocation of
the Group’s existing UK business.

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 any 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

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

102

SECTION 5.3
NON-CONTROLLING
INTERESTS

MATERIAL ASSET RESTRUCTURING IN CHINA
In December 2020, Carlsberg and Chongqing
Brewery Co. completed a material asset
restructuring and contributed their controlled
Chinese assets to Chongqing Jianiang Brewery.

Chongqing Jianiang Brewery is jointly owned by
Chongqing Brewery Co. (51%) and the Carlsberg
Group (49%). The ownership remains unchanged
following the completion of the restructuring,
and the ownership of the listed company
Chongqing Brewery Co. is also unchanged at
60%. The Group thereby directly and indirectly
holds 79% of Chongqing Jianiang Brewery.

At completion, the Group’s ownership of the
assets it injected (previously 70-100% owned)
thereby declined to 56-79%, while the Group’s
ownership of the assets injected by Chongqing
Brewery Co. increased from 60% to 79%.
Effectively, the transactions thereby exchange
shareholdings of the injected entities between
the Group and the non-controlling shareholders
in Chongqing Brewery Co.

The fair value of the entities injected by the
Carlsberg Group exceeds that of the entities
injected by Chongqing Brewery Co. In addition
to the exchange of shareholdings, Chongqing
Brewery Co. will therefore pay a cash amount to
the Group. The amount will be determined
based on 2020 earnings and paid in April 2021.

The transaction is accounted for as an equity
transaction with the non-controlling interests
and resulted in a net increase in equity for

Transactions with non-controlling interests

DKK million

2020

Changes in equity

Shareholders in
Carlsberg A/S

Non-controlling
interests

Total equity

Change in ownership from asset restructuring in China

Transaction cost related to asset restructuring in China

Fair value adjustments of contingent consideration and other
transactions with non-controlling interests

Recognised in equity

2019

Disposal of 40% of Carlsberg UK to Marston's

Non-controlling interest in Marston's brewing activities retained
by Marston's

Acquisition of entities

-553

-51

3,748

3,144

-4,466

-182

553

-26

614

-55

730

479

1,209

-77

3,835

3,758

-4,521

548

479

1,027

SECTION 5.3 (CONTINUED)
NON-CONTROLLING
INTERESTS

SECTION 5.4
CONTINGENT
CONSIDERATIONS

Contingent considerations relate to options
held by non-controlling interests in subsidiaries
to sell their shares to the Group and to deferred
payments in the acquisition of entities
depending on market developments.

At the end of the reporting period, the
contingent considerations 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), in Brewery
Alivaria, Belarus, in a craft brewery in Western
Europe, and to the contingent consideration in
the acquisition of Marston’s brewing activities.

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 consolidated ownership is stated in section
10.

non-controlling interests and a corresponding
decrease for shareholders in Carlsberg A/S.

The transaction was completed in December
2020 and had an insignificant impact on the
allocation of profit for December 2020.
At completion, the transferred shareholdings
impacted the allocation of equity between
shareholders in Carlsberg A/S and non-
controlling interests by DKK 553m.

CHANGES IN THE UK AS A RESULT OF THE
ACQUISITION OF MARSTON’S BREWING
ACTIVITIES
In October 2020, Carlsberg UK and Marston’s
PLC injected their respective brewing activities
into a jointly owned company named Carlsberg
Marston’s Brewing Company Limited. The
transaction is further described in section 5.2.
Carlsberg is the controlling shareholder in the
joint venture with a shareholding of 60%, having
effectively transferred 40% of its businesses in
the UK.

The fair value of the transferred shareholding is
part of the total consideration paid for the
brewing activities injected by Marston’s PLC. At
completion, the transferred shareholding
impacted the allocation of equity between
shareholders in Carlsberg A/S and non-
controlling interests by DKK 730m.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

103

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.

The valuation of put options at fair value
decreased due to the COVID-19 impact on the
businesses. The size of the decline differs from
market to market depending on the impact of
the pandemic, government actions, including
lockdowns, and the expected time to return to
the market conditions and earnings seen before
the outbreak. Interest rates of 4.8-7.4% and
residual growth rates of 4.0-5.0% were applied
in the valuation of contingent considerations.

Other contingent considerations are linked to
the development in the share price of selected
beverage companies.

Movements during the year comprise
acquisition of entities and fair value
adjustments of contingent considerations, net
of exercised put options during the year.

Of the contingent considerations, DKK 5bn
(2019: DKK 9bn) 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.

In one of the agreements, the partner can
initiate the put option process from 1 January
2021. Our partner has not yet initiated the put
option process, and it is not expected that the
options will be exercised during 2021.

TRANSACTIONS IN 2019
In 2019, the remaining outstanding shares in
Caretech Limited (the parent company in the
Cambrew Group) were acquired. The related
contingent consideration was derecognised. A
loss of DKK 526m was recognised in equity on
exercise of these put options.

Contingent considerations

DKK million

Contingent considerations at 1 January

Movements, net

Contingent considerations at 31 December

2020

9,023

-3,733

5,290

2019

6,168

2,855

9,023

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

104

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.

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.

Other contingent considerations (earn-outs), which
are not linked to a future transfer of additional
shareholdings, are measured in accordance with the
terms of the contract with the seller. The revaluation
of such contingent considerations is recognised in
special items.

Fair value of investment in listed associates

DKK million

The Lion Brewery
Ceylon, Sri Lanka

2020

382

2019

443

None of the associates and joint ventures are
material to the Group.

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.

SECTION 5.4 (CONTINUED)
CONTINGENT
CONSIDERATIONS

ACCOUNTING ESTIMATES
AND JUDGEMENTS

The fair value of contingent considerations linked to
put options 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.

The fair values of other contingent considerations are
measured at the expected future price of certain
selected shares.

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

SECTION 5.5
ASSOCIATES AND
JOINT VENTURES

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 2,589m at 31
December 2020 (2019: DKK 2,658m).

In 2019, the Group increased its ownership of
Super Bock, Portugal, to 60%. Nevertheless,
Super Bock remains an associate of the Group
due to the ownership structure. Please refer to
section 10 for further details.

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.

Key figures for associates and joint ventures

DKK million

Carlsberg Group share

2020

Associates

Joint ventures

Total

2019

Associates

Joint ventures

Total

Profit
after tax

Other
comprehensive
income

Total
comprehensive
income

Investments in
associates and
joint ventures

315

278

-4

311

282

4,191

-3

4,188

4,366

-2

4,364

SECTION 6

TAX

24.7%

TAX RATE
The tax rate is down from 26.9% in 2019.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

105

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 nominal weighted tax rate declined
compared with 2019, as Russia (tax rate 20%)
and Laos (tax rate 20%) contributed a
proportionally larger share, countered by
Norway (tax rate 22%).

The effective tax rate of 24.7% (2019: 26.9%)
was positively impacted by the non-taxable
and non-deductible transactions in special
items. Excluding these items, the effective tax
rate would be 25.7%.

The Group’s total tax cost at the effective tax
rate was DKK 354m higher than the Group’s
nominal weighted tax, negatively impacted by
withholding taxes (particularly on dividends),
non-capitalised tax assets and non-deductible
expenses (particularly marketing expenses and
intercompany charges).

It is not possible to deduct all interest and fair
value adjustments arising 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.

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
expense, the tax benefit of the excess deduction is
recognised directly in equity.

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

Effective tax rate for the year, excluding the
effect of non-taxable and non-deductible
transactions in special items

2020

2019

DKK million

20.8

0.1

0.4

1.5

-0.7

1.6

-0.5

1.9

-0.4

24.7

1,879

138

-59

148

-45

-3

167

-41

2,233

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

156

-54

172

-27

-87

395

-45

2,751

25.7

26.9

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

106

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

2020

2019

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

2,024

160

2,233

2,046

202

2,127

608

-8

2,297

2,751

-60

-55

2,132

548

-8

2,696

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

7,640

-198

-1

7,445

Tax
income/
expense

2020

After tax

7,640

-176

Recognised
item
before tax

-3,485

323

571

-4

-14

7,509

-2,609

Tax
income/
expense

-20

-38

-55

2019

After tax

-3,485

303

533

-4

-11

-2,664

SECTION 6.2
TAX ASSETS AND
LIABILITIES

Of the total deferred tax assets recognised,
DKK 201m (2019: DKK 312m) 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 936m (2019:
DKK 678m) 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 962m (2019:
DKK 472m). Remaining tax losses of DKK
355m (2019: DKK 206m) will expire within five
years.

Deferred tax of DKK 41m (2019: DKK 54m)
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 0m (2019:
DKK 180m). The deferred tax plus the additional
tax on the gain on the Group’s internal transfer
of shares is expected to materialise within the
next few years.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

107

SECTION 6.2 (CONTINUED)
TAX ASSETS AND
LIABILITIES

Changes in deferred tax and non-current tax
payables for the year amounted to DKK 160m
(2019: DKK 608m).

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

2020

4,779

1,486

2019

4,652

1,795

6,265

6,447

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 respectively.

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.

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.

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 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.

Specification of deferred tax

Changes to non-current tax assets and liabilities

Deferred tax assets

Deferred tax liabilities

DKK million

Tax assets and liabilities at 1 January, net

Adjustments to prior years

Acquisition 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

2020

4,509

107

160

-329

4,498

2019

3,910

-206

-60

608

-8

225

4,509

DKK million

Intangible assets

Property, plant and equipment

Current assets

Provisions and retirement benefit obligations

Fair value adjustments

Tax losses etc.

Total before offset

Offset

2020

388

281

386

929

1,204

3,223

2019

465

432

367

1,022

1,403

3,689

-1,456

-1,751

Deferred tax assets and liabilities at 31 December

1,767

1,938

Expected to be used as follows

6,265

-1,767

4,498

6,447

-1,938

Within one year

After more than one year

4,509

Total

964

803

1,767

695

1,243

1,938

2020

3,280

1,583

228

1,109

6,235

-1,456

4,779

1,701

3,078

4,779

2019

3,680

1,734

935

6,403

-1,751

4,652

2,115

2,537

4,652

SECTION 7

STAFF COSTS AND
REMUNERATION

Reset

To prepare for a new post-COVID-19-
reality, we initiated a review and reset of
our total cost base towards the end of the
year, called Reset for the future.

Employees
by segment (%)

2020

(2019)

Pensions

Defined benefit obligations were affected
by lower discount rates across all markets
as a result of the COVID-19 pandemic, and
by the transfer of the large medical
insurance scheme to the municipal
government, releasing the Group from the
obligation.

Western Europe 29% (28%)
Asia 38% (38%)
Eastern Europe 30% (32%)
Other 3% (2%)

by function (%)

2020

(2019)

Production 31% (32%)
Sales & Distribution 59% (59%)
Administration 10% (9%)

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

108

During 2020, the average number of employees
decreased due to terminations as part of Reset
for the future, partly offset by the acquisition of
Marston’s brewing activities. As the restructurings
and acquisition were completed in the second
half of the year, the full impact is not visible in
the average number of employees for the year.

SECTION 7.1
STAFF COSTS

Staff costs decreased for several entities in 2020
as a consequence of lower performance-related
payouts due to COVID-19 and compared with
the relatively high payouts for 2019 due to good
financial performance. This was partly offset by
increased redundancies etc.

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

2020

7,841

177

1,172

303

-19

9,631

40,010

2,672

5,087

1,902

-189

2019

8,549

1,344

300

217

10,590

41,248

2,866

5,575

2,192

-133

9,631

10,590

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

109

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.

Regular performance shares
In 2020, 190 employees (2019: 192
employees) across the Group were awarded
performance shares.

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 770 (2019: DKK 803). The average
contractual life at the end of 2020 was 1.2
years (2019: 1.5 years).

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 7.2
REMUNERATION

The remuneration of the Supervisory Board,
the executive directors and key management
personnel is described in detail in the
Remuneration Report.

The remuneration of key management
personnel decreased in 2020, primarily as a
result of the COVID-19 impact on the KPIs
measured in both short- and long-term
incentive programmes.

In 2020, the Supervisory Board received total
remuneration of DKK 9.86m (2019: DKK
9.59m), comprising fixed salary only.

All elements except for share-based payments
are classified as short-term employee benefits.
Share-based payments are classified as a
long-term employee benefit.

Remuneration

DKK million

Fixed salary

Cash bonus

Other benefits

Severance payments

Remuneration settled in cash

Non-monetary benefits

Share-based payments

Remuneration, non-monetary and share-based

Total cash and non-cash

Executive directors

Key management
personnel

2020

20.7

9.3

1.1

31.1

0.4

26.0

26.4

57.5

2019

20.2

18.5

1.1

39.8

0.4

37.0

37.4

77.2

2020

29.7

12.4

8.5

8.3

58.9

1.1

10.5

11.6

70.5

2019

26.5

24.5

7.0

58.0

0.7

21.4

22.1

80.1

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 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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

110

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. The programme vested in
2020 with all KPIs fully achieved.

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 2.8 years
(2019: 3.6 years).

Share option disclosures

DKK million

Fair value at 31 December

2020

2019

ACCOUNTING ESTIMATES
AND JUDGEMENTS

ACCOUNTING
POLICIES

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.

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.

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.

Performance shares

31 December 2018

Granted

Forfeited/adjusted

Exercised/settled

31 December 2019

Granted

Forfeited/adjusted/transferred

Exercised/settled

31 December 2020

Performance share disclosures

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

Executive
directors

203,484

61,331

-17,353

-58,057

189,405

48,991

-28,919

-66,865

142,612

Key
management
personnel

Other
management
personnel

88,919

27,569

-18,240

98,248

22,550

513,661

167,918

-64,592

616,987

130,515

Total

806,064

256,818

-100,185

-58,057

904,640

202,056

-16,970

-160,696

-206,585

-49,277

-307,465

-423,607

54,551

279,341

476,504

Key information

Assumptions

Expected volatility

Risk-free interest rate

Expected dividend yield

Expected life of options, years

Fair value at measurement date

Regular
performance shares

Fund & Grow
performance
shares

2020

2019

16.0%/21.0%

0.0%

0.0/3.0%

3.0

16%

0.0%

2.3%

3.0

N/A

0.0%

2.2%

2.0

DKK 567-894

DKK 648-651

DKK 684

Share options

Regular

Fund & Grow

2020

131

132

458

2019

167

104

162

510

2020

2019

112

31 December 2018

31 December 2019

361

31 December 2020

Exercise price

Number

Fixed,
weighted
average

518

Executive
directors

114,984

Other
management
personnel

Total

114,984

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

111

associated with future developments in interest
rates, inflation, mortality and disability etc.

Obligation, net

2020

2019

The most significant plans are in the UK and
Switzerland, representing 50% and 38%
respectively (2019: 47% and 39%), while the
eurozone countries represented 5% (2019: 5%)
of the gross obligation at 31 December 2020.

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 1,589m
(2019: DKK 1,802m) or 12% (2019: 13%) of
the gross obligation.

In 2020, the Group’s obligation, net, on defined
benefit plans decreased by DKK 365m
compared with 2019 because of general
decreases in the net obligation across the
Group. Two particularly significant factors in
this were the DKK 213m decrease in China, as
a result of the municipal government in
Xinjiang assuming responsibility for the long-
term medical insurance scheme, and the DKK
305m net decrease in Switzerland, reflecting
higher benefits paid out and an increase in the
assets plan. This effect was partially offset by
changes in actuarial assumptions in the UK,
primarily lower discount rates, as an effect of
the COVID-19 pandemic, which increased the
net obligation, mainly due to actuarial losses of
DKK 150m.

DKK million

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

13,771

10,472

3,299

12,239

9,331

2,908

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

223

-242

160

141

682

733

-608

-28

-421

-1,057

114

223

-242

199

-169

256

288

189

199

-169

-98

734

-52

1,452

-1

1,354

717

783

735

-66

571

182

-504

-351

-666

-182

-104

-35

-70

-391

-594

225

-486

-225

-108

482

-110

430

169

-279

3,299

Obligation at 31 December

13,588

10,654

2,934

13,771

10,472

The total return on plan assets for the year amounted to DKK 850m (2019: DKK 906mm).

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% (2019: 61%) of the Group’s retirement
benefit costs related to defined contribution
plans. In 2020, the expense recognised in
relation to these contributions was DKK 303
(2019: DKK 300m).

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

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

112

SECTION 7.4 (CONTINUED)
RETIREMENT
BENEFIT
OBLIGATIONS
AND SIMILAR
OBLIGATIONS

The Group expects to contribute DKK 74m
(2019: DKK 79m) to the plan assets in 2021.
Plan assets do not include shares in or
properties used by Group companies.

Amounts recognised in other comprehensive
income for 2020 totalled DKK -429m (2019:
net gain of DKK 681m), comprising foreign
exchange adjustment, DKK 129m, and net
actuarial loss, DKK 300m, which in 2019
included reversal of an asset ceiling in the UK
of DKK 66m.

The accumulated actuarial loss and foreign
exchange adjustment recognised at 31
December 2020 was DKK 3,287m (2019: DKK
3,710m), with actuarial net losses of DKK
3,733m (2019: DKK 3,734m).

Assumptions applied
In 2020, 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_2019 projections, while the Swiss entities
use BVG 2015 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 2020 was 21 years. The duration is
calculated using a weighted average of the
duration divided by the obligation.

Breakdown of plan assets

Bonds and other securities

Real estate

Cash and cash equivalents

Total

Assumptions applied

2020

Discount rate

Growth in wages and salaries

2019

Discount rate

Growth in wages and salaries

Sensitivity analysis

DKK million

Discount rate

Growth in wages and salaries

Mortality

2020

2019

DKK
million

992

7,578

1,914

170

DKK
million

1,004

7,080

2,231

157

10,654

100

10,472

100

CHF

0.2%

1.0%

0.1%

1.0%

EUR

1.6% 0.3 - 0.7%

2.1% 0.2 - 2.7%

Other

1.8%

2.0%

Weighted
average

0.6%

1.2%

2.2%

0.3-0.9%

0.0-2.7%

2.5%

3.1%

1.3%

1.8%

2020

+0.5%

-0.5%

+0.5%

-1,514

1,715

-1,063

-67

+1 year

-1 year

+1 year

452

-378

580

2019

-0.5%

1,216

-65

-1 year

-582

Maturity of retirement benefit obligations

DKK million

2020

2019

< 1 year

1-5 years

> 5 years

Total

611

449

2,313

10,664

13,588

2,121

11,201

13,771

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

113

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 included in retained earnings.

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 8

OTHER DISCLOSURE
REQUIREMENTS

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

114

6,363m

Profit attributable to shareholders in
Carlsberg A/S, adjusted for special items
after tax (DKK).

43.6

Earnings per share, adjusted for special
items after tax (DKK).

SECTION 8.1
EARNINGS PER
SHARE

During 2020, the Group repurchased a total of
2.9m B shares under the share buy-back
programme. The continued share buy-back
programme decreased the average number of
shares by 4.3m. This increased adjusted
earnings per share by DKK 1.2. The adjustment
for special items after tax more than offset the
lower profit for the year compared with the
previous year and increased adjusted earnings
per share by DKK 1.4.

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

2020

41.3

41.1

43.6

2019

43.7

43.4

41.0

149,407

-3,303

146,104

646

152,557

-2,146

150,411

817

146,750

151,228

6,808

-778

6,030

333

6,363

7,477

-908

6,569

-409

6,160

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

115

SECTION 8.2
FEES TO AUDITORS

The following transactions took place between
the Carlsberg Foundation and the Group in
2020:

charge from the Group as part of the
sponsorship of certain events at an
accumulated value of DKK 0.01m.

The income statement and the statement of
financial position include the following
transactions

Fees to auditors appointed by the
Annual General Meeting

DKK million

2020

2019

PwC, including network
firms

Statutory audit

Assurance engagements

Tax advisory

Other services

Total

Fees for services other than the statutory audit
of the financial statements provided by
PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab, Denmark, amounted
to DKK 2m (2019: DKK 8m), including advice
relating to information security, internal
controls, and 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 29.6% of the shares and
75.6% of the voting power in Carlsberg A/S,
excluding treasury shares.

The Carlsberg Foundation received a dividend
of DKK 21.00 per share from Carlsberg A/S,
the same as every other shareholder. The
dividend received amounted to DKK 970m.

Through its pro-rata participation in the share
buy-back programme, the Carlsberg
Foundation sold B shares to Carlsberg A/S at a
fair value of DKK 880m. The Foundation
thereby reduced its shareholding to 29.6% at
31 December 2020 (2019: 29.4%). 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 30.3m, for the basic research and
development activities at the Carlsberg
Research Laboratory (2019: DKK 39m). Of the
total grants, DKK 22m (2019: DKK 41m) was
deferred to be used for research projects in the
future.

In 2020, the Carlsberg Foundation contributed
DKK 52m that will be used to support the
rebuilding of the Carlsberg Visitor Centre during
2021 and 2022 to better showcase Carlsberg’s
rich history and value creation.

OTHER ACTIVITIES
Carlsberg A/S held the Annual General
Meeting at Ny Carlsberg Glyptotek at a cost of
DKK 0.2m. Furthermore, Ny Carlsberg
Glyptotek 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 2020,
the deliveries amounted to DKK 0.1m (total
sales of goods) (2019: DKK 0.2m).

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 leases
are on market terms.

It is estimated that the benefit for the Carlsberg
Group corresponds to the value of the other
activities 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 7 of the
consolidated financial statements.

DKK million

2020

2019

Associates and joint ventures

Revenue

Cost of sales

Sales expenses

Interest income

Loans

Receivables

Trade payables and other
liabilities

-756

-703

-14

213

241

-10

-2

SECTION 8.4
EVENTS AFTER THE
REPORTING PERIOD

On 1 January 2021, the Group completed the
minor acquisition of Wernesgrüner Brewery,
Germany, which will be fully consolidated as of
the acquisition date.

Apart from this and 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 2020 CONSOLIDATED FINANCIAL STATEMENTS

116

Changes in
2021

SEGMENTATION
The regional structure of the Group
changed as of 1 January 2021 to rebalance
the European regions in terms of size and
number of business units. Consequently,
the segmentation changed on the same
date (in line with the structure).

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 2020 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 hedge

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

117

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.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

118

The annual report submitted to the Danish
Financial Supervisory Authority (the Officially
Appointed Mechanism) consists of the XHTML
document together with the technical files, all
of which are included in the ZIP file CARL-
2020-12-31.ZIP.

Key definitions
XHTML (eXtensible HyperText Markup
Language) is a text-based language used to
structure and mark up content such as text,
images and hyperlinks in documents that are
displayed in a web-browser.

iXBRL tags (or Inline XBRL tags) are hidden
metainformation embedded in the source code
of an XHTML document that enables the
conversion of XHTML-formatted information
into a machine-readable XBRL data record
using appropriate software.

A financial reporting taxonomy is an electronic
dictionary of business reporting elements used
to report business data. A taxonomy element is
an element defined in a taxonomy that is used
for the machine-readable labelling of
information in an XBRL data record.

SECTION 9.2 (CONTINUED)
GENERAL
ACCOUNTING
POLICIES

9.2.1 REPORTING UNDER THE ESEF
REGULATION

The Commission Delegated Regulation (EU)
2019/815 on the European Single Electronic
Format (ESEF Regulation) has introduced a
single electronic reporting format for the
annual financial reports of issuers with
securities listed on the EU regulated markets.

The combination of XHTML format and iXBRL
tags enables the annual financial reports to be
read by both humans and machines, thus
enhancing accessibility, analysis and
comparability of the information included in the
annual financial reports.

The Group’s iXBRL tags have been prepared in
accordance with the ESEF taxonomy, which is
included in the ESEF Regulation and developed
based on the IFRS taxonomy published by the
IFRS Foundation.

The line items in the consolidated financial
statement are tagged to elements in the ESEF
taxonomy. For financial line items that are not
directly defined in the ESEF taxonomy, an
extension to the taxonomy has been created.
Extensions are anchored to elements in the
ESEF taxonomy, except for extensions that are
subtotals.

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

119

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 profit before depreciation, amortisation and impairment losses 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).

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.

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.

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.

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).

GLOSSARY

EBITDA1

Expression used for operating profit before depreciation, amortisation and
impairment losses.

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.

STOCK MARKET RATIOS

Earnings per share (EPS)

Earnings per share, diluted (EPS-D)

Consolidated profit for the year, excluding non-controlling interests, divided by
the average number of shares.

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.

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.

Leverage ratio1

Expression used for NIBD/EBITDA.

NCI

OCI

Off-trade

On-trade

Abbreviation for non-controlling interests.

Abbreviation for other comprehensive income.

Expression used for sale of beverages for consumption off the premises (e.g.
retailers).

Expression used for sale of beverages for consumption on the premises (e.g.
restaurants, hotels and bars).

Operating profit

Expression used for operating profit before special items1.

Organic development1

Measure of growth excluding the impact of acquisitions, divestments and
foreign exchange from year-on-year comparisons.

Volumes1

The Group’s sale of beverages in consolidated entities and sale of the Group’s
products under licence agreements.

1 This key figure, ratio or elements thereof are not defined or deviate 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 2020 CONSOLIDATED FINANCIAL STATEMENTS

120

SECTION 9.4
NEW LEGISLATION

NEW AND AMENDED IFRS STANDARDS
The following Amendments to IFRS became
effective as of 1 January 2021:

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS

4 and IFRS 16 “Interest rate benchmark
reform – Phase 2”

• Amendment to IFRS 4 “Insurance Contracts”

The amendment to IFRS 3 is expected to be
adopted by the EU in early 2021. The Group
will adopt the amendment when it becomes
mandatory.

The implemented Amendments 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 2020.

NEW AND AMENDED IFRS STANDARDS
AND INTERPRETATIONS NOT YET
ADOPTED BY THE EU
The following Amendments that become
effective in future years have been issued but
not yet adopted by the EU:

• Amendments to IFRS 3 “Business

Combinations”

• Amendment to IAS 16 “Property, Plant and

Equipment”

• Amendment to IAS 37 “Provisions, Contingent

Liabilities and Contingent Assets”
• Annual Improvements 2018-2020
• Amendment to IAS 1 “Presentation of
Financial Statements: Classification of
Liabilities as Current or Non-current and
Classification of Current or Non-current –
Deferral of Effective Date”

The new Standard is not mandatory for the
financial reporting for 2020. The Group expects
to adopt the new Standard when it becomes
mandatory.

SECTION 9.3
CHANGES IN
ACCOUNTING
POLICIES

CHANGED ACCOUNTING POLICIES
AND CLASSIFICATION IN THE ANNUAL
REPORT 2020
The Annual Report 2020 has been prepared
using the same accounting policies for
recognition and measurement as those applied
to the consolidated financial statements for
2019, except for the following Amendments
that were adopted as of 1 January 2020:

• Amendments to IAS 1 and IAS 8 “Definition of

Material”

• Amendments to IFRS 3 “Business

Combinations”

• Amendments to IFRS 9, IAS 39 and IFRS 7

“Interest rate benchmark reform”
• Amendments to “References to the

Conceptual Framework in IFRS Standards”

The, Amendments 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 2020.

SECTION 9.5
NEW SEGMENTATION

NEW SEGMENTATION FOR 2021
The regional structure of the Group changed as
of 1 January 2021, with the aim of rebalancing
the European regions in terms of size and
number of business units.

IFRS 8 requires that an entity discloses
information about its operating segments,
including profit and loss for each reportable
segment. These segment disclosures should
follow the “management approach”, meaning
they should be the same segments as are
regularly reported to management.

The effect of the new segmentation
With the new segmentation the entities in the
Baltic and Balkan countries, Greece and Italy
(collectively known as the Southern Europe &
Baltics markets) as well as Carlsberg Export &
License move from the Western Europe region
to Eastern Europe.

Eastern Europe will then be renamed Central &
Eastern Europe to better reflect its new
composition.

The disclosure in the Annual Report follows the
same regional segmentation as was used in the
internal reporting to the Executive Committee
throughout 2020.

New segmentation

As the management structure was unchanged
during 2020, the segmentation used in the
Annual Report 2020 continues without any
changes compared with 2019.

DKK Million

Revenue

Total cost

The segmentation changed as of 1 January
2021, when the new management structure
took effect. To provide transparency, it has
been decided to disclose the effect of the
new segmentation had it become effective at
1 January 2020 and as it will be disclosed in
the comparative figures for 2020 in the Annual
Report 2021.

Share of profit after tax of associates and joint ventures

Operating profit before special items

Operating margin

Invested capital

Invested capital excl. goodwill

Acquisition of property, plant and equipment and intangible assets

Amortisation and depreciation

Impairment losses

Return on invested capital (ROIC)

ROIC excl. goodwill

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

121

Reported

Restated

Western
Europe

Asia

Eastern
Europe

Western
Europe

Asia

2020

Central &
Eastern
Europe

31,547

16,959

10,010

25,875

16,959

15,682

-26,763

-13,057

-8,093

-22,143

-13,057

-12,713

209

4,993

15.8%

3,991

23.5%

1,917

19.2%

194

3,926

15.2%

3,991

23.5%

2,984

19.0%

41,795

18,045

20,915

35,746

18,045

26,964

19,151

1,474

2,095

9.4%

20.2%

2,682

8,430

16,142

2,682

11,439

1,395

1,499

292

15.8%

88.8%

552

654

7.0%

17.4%

1,258

1,712

8.7%

18.8%

1,395

1,499

292

15.8%

88.8%

768

1,037

8.5%

19.8%

Part of management review - not audited

New segmentation

Beer (million hl)

Western Europe

Asia

Central & Eastern Europe

Total

Non-beer (million hl)

Western Europe

Asia

Central & Eastern Europe

Total

Total beverages (million hl)

Western Europe

Asia

Central & Eastern Europe

Total

Revenue (DKK million)

Western Europe

Asia

Central & Eastern Europe

Not allocated

Total

CARLSBERG GROUP ANNUAL REPORT 2020 PART OF MANAGEMENT REVIEW - NOT AUDITED

122

5.6

7.8

9.0

22.4

2.5

1.3

0.7

4.5

8.1

9.1

9.7

26.9

7.7

9.8

13.4

30.9

2.8

1.0

1.2

5.0

10.5

10.8

14.6

35.9

13.3

7.8

17.6

22.4

53.3

5.3

2.3

1.9

9.5

18.6

19.9

24.3

62.8

10.5

15.6

33.9

3.2

1.2

5.6

11.0

11.7

16.8

39.5

5.7

6.7

10.5

22.9

2.7

1.3

0.9

4.9

8.4

8.0

11.4

27.8

13.5

26.8

17.2

26.1

56.8

5.9

2.5

2.1

10.5

19.4

19.7

28.2

67.3

34.8

48.5

110.1

11.2

4.8

4.0

20.0

38.0

39.6

52.5

130.1

5,613

4,052

3,275

6,888

4,411

4,582

12,501

8,463

7,857

7,674

4,703

4,873

5,700

3,793

2,952

13,374

8,496

7,825

12,946

15,884

28,830

17,259

12,452

29,711

25,875

16,959

15,682

58,541

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

123

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

Carlsberg Deutschland Logistik GmbH

Tuborg Deutschland GmbH

Market

Note

Denmark

Sweden

Norway

Finland

Germany

Number of
subsidiaries

Parent
direct
ownership

Consolidated
ownership

Western Europe

Market

Note

100%

Carlsberg Deutschland GmbH

100%

91%

100%

91%

100%

Duckstein GmbH

Holzmarkt Beteiligungsgesellschaft mbH

Holsten-Brauerei AG

Germany

Carlsberg Supply Company Deutschland 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

Poland

Estonia

Latvia

Lithuania

Carlsberg Marston's Brewing Company Limited UK

Marston's Beer Company Limited

Carlsberg UK Limited

Carlsberg Supply Company UK Limited

LF Brewery Holdings Limited

LF Brewery 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

France

Canada

France

Number of
subsidiaries

Parent
direct
ownership

Consolidated
ownership

100%

99%

100%

60%

100%

99%

100%

60%

100%

Consolidated financial statements

CARLSBERG GROUP ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS

124

Number of
subsidiaries

Western Europe

Market

Note

Feldschlösschen Getränke Holding AG

Feldschlösschen Getränke AG

Schlossgarten Gastronomie AG

SB Swiss Beverage AG

Feldschlösschen Supply Company AG

Carlsberg Supply Company AG

Nya Carnegiebryggeriet AB

E.C. Dahls Bryggeri AS

HK Yau Limited

UAB "Svyturys Brewery"

Monster the Cat GmbH

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

Carlsberg Hungary Kft.

Grimbergen Abbey Brewery

Zatecky Pivovar spol. S.r.o.

CTDD Beer Imports Ltd

Carlsberg Canada Inc.

Carlsberg USA Inc.

Switzerland

Sweden

Norway

Hong Kong

Lithuania

Switzerland

Italy

Greece

Serbia

Bosnia and
Herzegovina

Montenegro

Croatia

Bulgaria

Hungary

Belgium

Czechia

Canada

USA

Parent
direct
ownership

Consolidated
ownership

Asia

Market

Note

Hong Kong

100%

98%

100%

98%

100%

Carlsberg Supply Company Asia Ltd

Carlsberg Brewery Hong Kong Ltd

Guangzhou Carlsberg Consultancy and
Management Services Co Ltd

Chongqing Brewery Co., Ltd

Chongqing Jianiang Brewery Ltd

Kunming Huashi Brewery Company
Limited

Carlsberg (China) Breweries and Trading
Company Limited

Carlsberg Brewery (Guangdong) Ltd

Xinjiang Wusu Breweries Co., Ltd

China

Ningxia Xixia Jianiang Brewery Limited

China

Carlsberg Beer Enterprise Management
(Chongqing) Company Limited

Carlsberg Brewery (Anhui)
Company Ltd

Carlsberg Tianmuhu Brewery
(Jiangsu) Company 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

Malaysia

Singapore

India

Nepal

Vietnam

Number of
subsidiaries

Parent
direct
ownership

Consolidated
ownership

100%

60%

51%

100%

99%

100%

70%

100%

75%

100%

51%

100%

51%

67%

100%

90%

100%

60%

79%

56%

79%

60%

79%

51%

26%

100%

90%

100%

D, E

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 2020 CONSOLIDATED FINANCIAL STATEMENTS

125

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

Market

Vietnam

Laos

Singapore

Hong Kong

Cambodia

Thailand

Singapore

100%

61%

100%

99%

100%

61%

100%

99%

100%

Market

Note

Number of
subsidiaries

Parent
direct
ownership

Consolidated
ownership

Russia

Azerbaijan

Ukraine

Belarus

Kazakhstan

Sweden

100%

91%

100%

78%

100%

91%

100%

89%

100%

F Baltika Breweries is owned by Carlsberg Sverige AB.
G The 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

Poland

100%

Ejendomsaktieselskabet Tuborg Nord C

Carlsberg Ejendomme Holding A/S

Boliginteressentskabet Tuborg

H A separate annual report is not prepared.

Market

Note

Denmark

Number of
subsidiaries

Parent
direct
ownership

Consolidated
ownership

100%

Associates and joint ventures

Market

Note

Carlsberg Byen P/S

Shangri-la Beverages AG

Sinergie Proattive Srl

Viacer S.G.P.S., Lda

Super Bock Group, S.G.P.S., S.A.

Denmark

Switzerland

Italy

Portugal

Serviced Dispense Equipment (Holdings) Limited

Nuuk Imeq A/S

Chongqing Jiawei Beer Co. Ltd

Tibet Lhasa Brewery Company Limited

Lanzhou Huanghe Jianiang Brewery Company
Limited

Greenland

China

Qinghai Huanghe Jianiang Brewery Company Ltd China

Jiuquan West Brewery Company Limited

China

Tianshui Huanghe Jianiang Brewery Company Ltd China

Capital Brewing Company Ltd

Hong Kong

Lion Brewery (Ceylon) PLC

Sri Lanka

A, E, J

Hanoi Beer Alcohol and Beverage Joint Stock
Corporation

Carlsberg Distributors Taiwan Limited

NCC Crowns Private Limited

Bottlers Nepal Limited

Myanmar Carlsberg Co. Ltd

Vietnam

Taiwan

India

Nepal

Myanmar

Number of
subsidiaries

Parent
direct
ownership

Consolidated
ownership

25%

35%

50%

29%

56%

33%

32%

33%

50%

49%

25%

17%

50%

33%

22%

51%

25%

35%

50%

29%

60%

20%

32%

26%

50%

49%

13%

18%

50%

33%

20%

51%

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.

Parent Company financial statements

PARENT COMPANY FINANCIAL STATEMENTS

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

126

PARENT COMPANY FINANCIAL
STATEMENTS

Income statement ................................ 127

Statement of comprehensive
income ...................................................... 127

Statement of financial position ...... 128

Statement of changes in equity ..... 129

Statement of cash flows ................... 129

Notes ......................................................... 130

SECTION 1
SUBSIDIARIES AND RELATED PARTIES
Investments in subsidiaries ....................... 130
1.1
1.2 Related parties ............................................. 130

SECTION 2
CAPITAL STRUCTURE
2.1 Financial items ............................................. 131
2.2 Net interest-bearing debt ......................... 131
2.3 Share capital ................................................. 132

SECTION 3
STAFF COSTS AND REMUNERATION
3.1 Staff costs and remuneration .................. 133
3.2 Retirement benefit obligations ................ 133

SECTION 4
OTHER DISCLOSURE REQUIREMENTS
4.1 Other operating activities, net ................. 134
4.2 Cash flow ....................................................... 134
4.3 Provisions ....................................................... 134
4.4 Asset base and leases ............................... 134
4.5 Fees to auditors ........................................... 134
4.6 Tax ................................................................... 135
4.7 Contingent liabilities and other

commitments ............................................... 136
4.8 Events after the reporting period ........... 136

SECTION 5
GENERAL ACCOUNTING POLICIES
5

General accounting policies ..................... 136

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

127

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

4.6

2020

-42

-4

-46

-2

3,211

-14

3,149

3,160

3,259

-99

3,160

2019

-73

-29

-102

-3

2,748

-11

2,632

2,655

3,204

-549

2,655

DKK million

Profit for the year

Other comprehensive income

Retirement benefit obligations

Income tax

Items that will not be reclassified to the income statement

Other comprehensive income

Total comprehensive income

Section

2020

3,160

2019

2,655

3.2

4.6

-1

-2

3,159

2,653

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

128

STATEMENT OF FINANCIAL POSITION

DKK million

ASSETS

Non-current assets

Intangible assets

Property, plant and equipment

Investments in subsidiaries

Financial investment

Receivables

Tax assets

Total non-current assets

Current assets

Receivables

Tax receivables

Other receivables

Total current assets

Total assets

Section

31 Dec. 2020

31 Dec. 2019

DKK million

Section 31 Dec. 2020

31 Dec. 2019

4.4

1.1

4.6

1.2

EQUITY AND LIABILITIES

218

Equity

Share capital

218

Retained earnings

38,733

40,353

Total equity

323

322

111

Non-current liabilities

Retirement benefit obligations

39,371

41,009

Provisions

Total non-current liabilities

275

371

655

Current liabilities

Borrowings

1,205

Trade payables

1,297

Provisions

40,026

42,306

Other liabilities

Total current liabilities

Total liabilities

Total equity and liabilities

2.3

3.2

4.3

2,963

35,589

38,552

3,051

37,974

41,025

1.2

1,263

1,033

4.3

1,431

1,474

40,026

1,200

1,281

42,306

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

129

STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CASH FLOWS

DKK million

2020

Equity at 1 January

Profit for the year

Other comprehensive income

Total comprehensive income for the year

Cancellation of treasury shares

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

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

Section

Shareholders in Carlsberg A/S

DKK million

Share capital

3,051

-88

Retained
earnings

37,974

3,160

-1

3,159

353

-2,900

-3,093

-2,385

Operating profit before special items

Total equity

Depreciation and amortisation

41,025

3,160

-1

3,159

353

-2,900

-3,093

-2,473

Operating profit before depreciation and amortisation

Other non-cash items

Change in working capital¹

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

2,963

35,589

38,552

Total operational investments

3,051

41,937

2,655

-2

2,653

209

-4,100

-2,738

-3,963

3,051

37,974

44,988

2,655

-2

2,653

209

-4,100

-2,738

-3,963

41,025

Acquisition and disposal of subsidiaries

Disposal of securities

Dividends from subsidiaries and joint ventures

Capital reductions in subsidiaries

Total financial investments

Other investments in real estate

Total other activities

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

3.1

2.3

Section

4.4

1.2

2.3

2.2

2020

-46

-36

-2

-13

-10

-9

3,204

2,500

5,709

5,700

5,767

-5,993

226

-5,767

2019

-102

-94

-11

-24

-17

-15

2,746

4,500

7,255

-4

7,236

7,212

-6,838

-374

-7,212

SECTION 1

SUBSIDIARIES AND
RELATED PARTIES

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

130

SECTION 1.1
INVESTMENTS IN
SUBSIDIARIES

The carrying amount includes goodwill of DKK
11,206m (2019: 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

2020

2019

Cost

Cost at 1 January

40,353

45,238

Disposals

Capital reduction

Share-based payments
to employees, net

-2,500

-13

-4,500

880

-372

Cost at 31 December

38,733

40,353

Carrying amount at 31
December

38,733

40,353

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 2020. 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 29.6% of the shares and
75.6% 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 2020:
• 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 supported the
rebuilding of the Carlsberg Visitor Centre.

• Carlsberg Breweries leased storage facilities in

the researcher apartments.

• Carlsberg A/S held the Annual General
Meeting 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 Group delivered beer and soft drinks to

the Carlsberg Foundation.

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.

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

131

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 2020 or 2019.

Interest income relates to interest from cash
and cash equivalents and loans to subsidiaries,
whereas interest expenses relate to interest on
borrowings.

SECTION 2.2
NET INTEREST-
BEARING DEBT

Transactions with subsidiaries

2020

2019

Financial items recognised
in the income statement

DKK million

2020

DKK million

Other operating
activities, net

Interest income

Interest expenses

Dividends received

Capital reduction

Loans

Receivables

Borrowings

Trade payables

Other payables

-11

3,204

-2,500

321

275

-1,263

-17

-1

The fair value of receivables and borrowings in
subsidiaries corresponds to the carrying
amount in all material respects.

-14

2,746

-4,500

319

Financial income

Interest income

Dividends from
subsidiaries

Gain on disposal of
financial assets

-1,033

Total

-7

-6

Financial expenses

Interest expenses

Other

Total

Financial items, net

Net interest-bearing debt

DKK million

2019

Current borrowings

Gross interest-bearing debt

Receivables

Loans to subsidiaries

3,204

2,746

Net interest-bearing debt

3,211

-11

-3

-14

3,197

2,748

-14

-11

2,737

Changes in net interest-bearing debt

Net interest-bearing debt at 1 January

Cash flow from operating activities, excluding interest-bearing part

Cash flow from investing activities

Share buy-back

Dividends to shareholders

Total change

Net interest-bearing debt at 31 December

2020

1,263

-1

-321

941

711

-67

-5,700

2,900

3,093

226

937

2019

1,033

-3

-319

711

1,085

-7,236

4,100

2,738

-374

711

No financial items were recognised in other
comprehensive income.
The average effective interest rate on loans to
subsidiaries was 0.6% (2019: 0.6%) and on
loans from subsidiaries 0.4% (2019: 0.5%).

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

132

Transactions with shareholders
in Carlsberg A/S

Dividends to
shareholders

Acquisition of
treasury shares

Total

2020

2019

-3,093

-2,738

-2,900

-5,993

-4,100

-6,838

In the 2020 financial year, the Company
acquired class B treasury shares of a nominal
amount of DKK 66m (2019: DKK 90m) at an
average price of DKK 882 (2019: DKK 907).
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.

At 31 December 2020, the fair value of
treasury shares amounted to DKK 2,979m
(2019: DKK 4,532m). The holdings of treasury
shares are specified in section 4.3 in the
consolidated financial statements.

SHARE BUY-BACK AND TREASURY SHARES
As of 31 January 2020, the Company had
repurchased 393,501 B shares under the share
buy-back programme initiated in 2019 at a
total purchase price of DKK 0.4bn.

On 4 February 2020, the Company announced
its intention to continue the share buy-back
programme to repurchase shares worth DKK
5bn over a 12-month period. In the first
tranche, which was finalised on 7 August, the
Company repurchased 2,897,021 B shares at a
total purchase price of DKK 2.5bn. Due to the
continued uncertainties related to COVID-19
and the acquisitions of Marston’s brewing
activities and the Brooklyn brand rights, the
Board decided not to initiate the second
tranche of the share buy-back.

SECTION 2.3
SHARE CAPITAL

SHARE CAPITAL
At the Annual General Meeting on 16 March
2020, it was decided to reduce the share
capital of Carlsberg A/S by a nominal amount
of DKK 88,000,000 to a nominal amount of
DKK 2,963,136,120 by cancelling of
4,400,000 of the B shares of the Company,
each with a nominal value of DKK 20. The
cancellation was completed on 14 April 2020.
These shares had been repurchased as part
of the Company’s share buy-back programme
running from 6 February 2019 to
30 January 2020.

DIVIDENDS
The proposed dividend of DKK 22.00 per share
(2019: DKK 21.00 per share), amounting to
DKK 3,259m (2019: DKK 3,204m), has been
included in retained earnings at 31 December
2020.

Dividends to be paid out in 2021 for 2020,
net of dividends on treasury shares held at
31 December 2020, will amount to DKK
3,192m. Dividends paid out in 2020 for 2019,
net of dividends on treasury shares, amounted
to DKK 3,093m (paid out in 2019 for 2018:
DKK 2,728m). Dividends paid out to
shareholders in Carlsberg A/S do not impact
taxable income in Carlsberg A/S.

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 2019

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

Cancellation of
treasury shares

-4,400,000

-88,000

-4,400,000

-88,000

31 December 2020

33,699,252

673,985

114,457,554

2,289,151

148,156,806

2,963,136

SECTION 3

STAFF COSTS AND
REMUNERATION

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

133

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 2020, the Supervisory Board received total
remuneration of DKK 9.86m (2019: DKK
9.59m), 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 30m
(2019: DKK 33m) and include actuarial losses
of DKK 1m (2019: DKK 2m) and benefits paid
in the year of DKK 4m (2019: 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.

2020

130

2019

112

155

105

155

Of the expected payment obligation, DKK 3m
is due within one year and DKK 14m 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% (2019:
0.5%). The rate of increase in future retirement
benefit obligations was 0% (2019: 1%).

During the year, DKK 0m (2019: DKK 0m) was
recognised in the income statement and DKK
-1m (2019: DKK -2m) 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 95 (2019: 97) full-time employees during the year.

SECTION 4

OTHER DISCLOSURE
REQUIREMENTS

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

134

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 2020, real estate, net, amounted to DKK
9m (2019: DKK -1m), driven by parking lot
income in Tuborg Harbour.

Other operating activities, net

DKK million

2020

2019

Gains on disposal of real
estate

Real estate, net

Research activities,
including the Carlsberg
Research Laboratory, net

Other, net

Total

-13

-4

-1

-27

-2

-29

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
CASH FLOW

Change in working capital consists of other
receivables of DKK 20m (2019: DKK -5m),
trade payables and other liabilities of DKK
102m (2019: DKK 40m) and retirement benefit
obligations and other provisions of DKK -34m
(2019: DKK -6m).

Other activities cover real estate activities.

SECTION 4.3
PROVISIONS

Research expenses are partially financed
through funding received from the Carlsberg

Provisions primarily comprise warranty
provisions regarding real estate disposed of
and provisions for ongoing disputes.

At 31 December 2020, provisions amounted to
DKK 51m (2019: DKK 82m). Provisions
amounting to DKK 10m (2019: DKK 5m) were
utilised during the year. In 2020, unutilised
provisions of DKK 20m were reversed.

Of total provisions, DKK 39m (2019: DKK
34m) falls due within one year and the
remaining DKK 13m (2019: DKK 48m)
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.

SECTION 4.4
ASSET BASE AND
LEASES

The carrying amount of intangible assets was
DKK 3m (2019: DKK 5m), and the carrying
amount of property, plant and equipment was
DKK 218m (2019: DKK 218m). Property, plant
and equipment comprised land and buildings of
DKK 180m (2019: DKK 182m) and plant and
machinery of DKK 38m (2019: DKK 36m).

Depreciation and amortisation of DKK 10m
(2019: DKK 8m) 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 1m (2019: DKK 1m). Such
contracts comprise the lease of copy and
printing machines, coffee machines, small IT
devices and similar equipment.

SECTION 4.5
FEES TO AUDITORS

Fees to auditors appointed by the Annual
General Meeting

DKK million

Statutory audit

Assurance engagements

Tax advisory

Other services

Total

2020

0.3

2019

0.3

SECTION 4.6
TAX

Deferred tax assets amounted to DKK 103m
(2019: DKK 121m) and comprised tax on
property, plant and equipment of DKK 31m
(2019: DKK 34m), provisions and retirement
benefit obligations of DKK 13m (2019: DKK
19m), and tax losses etc. of DKK 59m (2019:
DKK 68m).

The utilisation of tax loss carryforwards
depends on future positive taxable income
exceeding the realised deferred tax liabilities.
Deferred tax liabilities amounted to DKK 10m
(2019: DKK 10m).

The net change in deferred tax assets of DKK
18m comprised tax recognised in total
comprehensive income of DKK 11m (2019:
DKK 23m) and a joint taxation contribution of
DKK -29m (2019: DKK -29m).

The total tax for the year recognised in the
income statement comprised income of
DKK 11m (2019: DKK 23m). Of the deferred
tax assets, DKK 5m (2019: DKK 6m) is
expected to be used within one year. All tax
assets have been recognised.

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 GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

135

Reconciliation of tax for the year

ACCOUNTING
POLICIES

DKK million

Calculated tax on profit

Adjustments to tax for
prior years

Non-deductible
expenses

Tax-free dividend and
tax-exempt items

Tax for the year

2020

693

-1

-706

-11

2019

579

-605

-23

ACCOUNTING ESTIMATES
AND JUDGEMENTS

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

2020

2019

Change in deferred tax and non-current tax liabilities during the year

Total

-11

-23

SECTION 5

CARLSBERG GROUP ANNUAL REPORT 2020 PARENT COMPANY FINANCIAL STATEMENTS

136

GENERAL
ACCOUNTING POLICIES

SECTION 4.7
CONTINGENT
LIABILITIES
AND OTHER
COMMITMENTS

Carlsberg A/S has issued guarantees to
subsidiaries for pension obligations of DKK
350m (2019: DKK 337m).

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.

SECTION 4.8
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 2020 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.

Financial statements

REPORTS

MANAGEMENT
STATEMENT

The Supervisory Board and the Executive
Board have today discussed and approved the
Annual Report of the Carlsberg Group and the
Parent Company for 2020.

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 2020 and of the results of the
Carlsberg Group’s and the Parent Company’s
operations and cash flows for the financial
year 2020.

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.

In our opinion, the Annual Report of the
Carlsberg Group and the Parent Company for
the financial year 1 January to 31 December
2020 identified as CARL 2020-12-31.ZIP has
been prepared, in all material respects, in
compliance with the ESEF Regulation.

We recommend that the Annual General
Meeting approve the Annual Report.

Copenhagen, 5 February 2021

CARLSBERG GROUP ANNUAL REPORT 2020 FINANCIAL STATEMENTS

137

Executive Board of Carlsberg A/S

Cees ’t Hart
President & CEO

Heine Dalsgaard
CFO

Supervisory Board of Carlsberg A/S

Flemming Besenbacher
Chair

Lars Fruergaard Jørgensen
Deputy Chair

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 REPORTS

CARLSBERG GROUP ANNUAL REPORT 2020 FINANCIAL STATEMENTS

138

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 2020 comprise income
statement and 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

REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS

OUR OPINION
In our opinion, the Consolidated Financial
Statements and the Parent Company Financial
Statements (pp [53-121] and [123-136]) give
a true and fair view of the Group’s and the
Parent Company’s financial position at 31
December 2020 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 2020 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 Board of Directors.

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 four years
including the financial year 2020.

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 2020. 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 standards due to
complexity arising 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 2020 FINANCIAL STATEMENTS

139

Our audit procedures included considering the appropriateness of the revenue
recognition accounting policies and assessing compliance with the accounting
standards.

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 judgements related to the recognition and classification of
revenue with Management. Further, we performed substantive procedures
regarding invoicing, significant contracts, significant transaction streams
(including discounts), and locally imposed duties and fees and cut-off at year-
end 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.

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 CGUs within the
business. We evaluated whether there were factors requiring Management to
change its 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 significant 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 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. We made use of our internal valuation specialists in
the audit. Further, we assessed the appropriateness of disclosures, including
sensitivity analyses prepared for the significant 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
significant assumptions are
Management’s view of prices,
volumes, discount rates, growth
rates, royalty rates, expected useful
life and costs, and future
free cash flows as well as the
judgement in defining cash-
generating units (CGUs).

We focused on this, as there is a
high level of subjectivity exercised by
Management in estimating future
cash flows and the models
used are complex.

The key assumptions and
accounting treatment are described
in section 2.2 “Impairment” in the
Consolidated Financial Statements.

CARLSBERG GROUP ANNUAL REPORT 2020 FINANCIAL STATEMENTS

140

STATEMENT ON THE MANAGEMENT REVIEW
Management is responsible for Management’s
Review, pp [3-52] and [122].

Our opinion on the Financial Statements does
not cover Management’s 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’s Review and, in doing so,
consider whether Management’s 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’s Review includes the disclosures
required by the Danish Financial Statements
Act.

Based on the work we have performed, in our
view, Management’s 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’s
Review.

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.

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.

• 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.

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.

REPORT ON COMPLIANCE WITH

THE ESEF REGULATION

As part of our audit of the Financial Statements
we performed procedures to express an opinion
on whether the annual report of Carlsberg A/S
for the financial year 1 January to 31
December 2020 with the filename CARL-
2020-12-31.zip is prepared, in all material
respects, in compliance with the Commission
Delegated Regulation (EU) 2019/815 on the
European Single Electronic Format (ESEF
Regulation), which includes requirements
related to the preparation of the annual report
in XHTML format and iXBRL tagging of the
Consolidated Financial Statements.

Management is responsible for preparing an
annual report that complies with the ESEF
Regulation. This responsibility includes:
• Preparing the annual report in XHTML

format;

• The selection and application of appropriate
iXBRL tags, including extensions to the ESEF
taxonomy and the anchoring thereof to
elements in the taxonomy, for all financial
information required to be tagged, using
judgement where necessary;

CARLSBERG GROUP ANNUAL REPORT 2020 FINANCIAL STATEMENTS

141

• Ensuring consistency between iXBRL-tagged,

data and the Consolidated Financial
Statements presented in human-readable
format; and

• For such internal control as Management

determines necessary to enable the
preparation of an annual report that is
compliant with the ESEF Regulation.

Our responsibility is to obtain reasonable
assurance on whether the annual report has
been prepared, in all material respects, in
compliance with the ESEF Regulation based on
the evidence we have obtained, and to issue a
report that includes our opinion. The nature,
timing and extent of procedures selected
depend on the auditor’s judgement, including
the assessment of the risks of material
departures from the requirements set out in the
ESEF Regulation, whether due to fraud or
error. The procedures include:
• Testing whether the annual report has been

prepared in XHTML format;

• Obtaining an understanding of the company’s
iXBRL tagging process and of internal control
over the tagging process;

• Evaluating the completeness of the iXBRL

tagging of the Consolidated Financial
Statements;

• Evaluating the appropriateness of the

company’s use of iXBRL elements selected
from the ESEF taxonomy and the creation of
extension elements where no suitable
element in the ESEF taxonomy has been
identified;

• Evaluating the use of anchoring of extension
elements to elements in the ESEF taxonomy;
and

• Reconciling the iXBRL-tagged data with the
audited Consolidated Financial Statements.

In our opinion, the annual report of Carlsberg
A/S for the financial year 1 January to
31 December 2020 with the file name CARL-
2020-12-31.zip has been prepared, in all
material respects, in compliance with the ESEF
Regulation.

Copenhagen, 5 February 2021

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 2020 FINANCIAL STATEMENTS

142

Carlsberg Group Annual Report

Carlsberg A/S
1 J. C. Jacobsens Gade
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