Germany: Holsten Group’s foreign sales rose by 2.1% to 1.8 million hl beer in 2005

With 6.8 million hectolitres (hl) of beer sales in financial year 2005, the Holsten Group is one of the leading brewery companies in Germany, with focus on northern and eastern Germany. 1,434 employees in five breweries generated a turnover of 361.8 million euros. The company’s annual net profit was at 15.2 million euros. At the general meeting on 15 August 2006, the board of directors will propose a dividend of 0.12 euros per individual share, the company recently issued.

Company sales volume

In 2005, the Holsten Group sold 6.8 million hl of beer. That is 3.3% below the comparable sales volume of the previous year of 7.0 million hl. In 2004, the actual volume of beer sold was 8.9 million hl; this, however, included sales from the now sold König brewery and Licher private brewery.

Holsten’s domestic sales were down by 5.1% compared with the previous year, at just under 5.0 million hl (industry – 0.8 % l). This development is partly due to the decline of branded beers on the market in general and could not be compensated for by the rise of the trade brands. Holsten Group’s foreign sales rose by 2.1% to 1.8 million hl beer.

Domestic and international sales

During the year under review, the withdrawal of the Holsten brands from national regions further south was continued with the aim of focusing on the key region of northern Germany. Sales were at 1.2 million hl (previous year 1.3 million hl). In 2005, the image was standardised and modernised. Using the slogan “Holsten. Auf uns, Männer“ (Holsten. To us, men), the brand has been positioned as a beer for men. In order to regain market leadership in the non-returnable sector, certain measures were put into place in preparation for the standardised return system, which was introduced on 1 May 2006 and replaces the various individual solutions.

In the year under review, the sales volume of the Lübzer brands increased slightly to 650,000 hl, thus maintaining their position as market leader in Mecklenburg-Western Pomerania and also gaining ground in other new federal states of the former GDR. With an increase of 50%, the sales development of the mixed beer beverage Lübzer Lemon was also favourable.

In 2005, the distribution of the Carlsberg brand was significantly increased in retail and in catering. This expansion was accompanied by the brand message “Genieße in einer Welt voller Freunde“ (Enjoy in a world full of friends). Carlsberg is brewed in accordance with the German purity law and has been positioned internationally as a cosmopolitan and confident alternative to the German premium beers.

The year 2005 was used to increase the extraordinary strength of the super premium brand Duckstein. The advertising campaign “Duckstein ist ein Kunstwerk“ (Druckstein is a work of art) highlighted the unique nature and exclusivity of the product. This also served as a basis for extending the brand’s distribution and to prepare the introduction of Duckstein wheat beer in spring 2006.

Holsten Group’s international business includes export and the issuing of licenses. Compared with the previous year, in the year under review, total foreign sales were up by 2.1% to 1,794,000 hl. Exports from Germany were just under the level of 2004 (1,154,000 hl) with 1,148,000 hl. The positive development of the export of alcohol-free beer and mixed beer beverages to the Middle East, Saudi Arabia in particular, continued.
Sales resulting from licensing increased by 6.9% to a total of 646,000 hl. The Holsten license in Russia underwent a particularly positive development, rising by almost 10% to 596,000 hl. In the year under review, licensed production in Romania was up, reaching a total of more than 50,000 hl.

New structure

Since April 2004, Holsten has been part of the international Carlsberg Group, the fifth largest brewery in the world. In the same year, the Holsten Group was restructured. The König brewery and the Licher private brewery were sold. Furthermore, Holsten-Brauerei AG sold its majority holding in Hansa-Heemann AG, thus putting an end to its engagement in the alcohol-free beverages segment. The figures of these companies are included pro rata in the consolidated accounts of 2004. These figures are comparable to those of the year under review only to a limited extent.

During the extraordinary general meeting which was held on 27 January 2005 in Hamburg, upon request of the principal shareholder, Carlsberg Deutschland GmbH, Mönchengladbach, in accordance with §§ 327 a ff. AktG, it was decided that the shares of the other shareholders will be transferred to the principal shareholder in return for a cash compensation of 38 euros. Legal action has been filed against the decision of the general meeting. The decision of transfer has therefore not yet been entered into the register of companies.

Results situation

The turnover of the Holsten Group dropped in 2005 to 361.8 million euros (previous year: 488.1 million euros). This drop is mainly due to the changed basis of consolidation: the figures of 2004 included some figures of König brewery, of Licher private brewery and of Hansa-Heemann AG.

In financial year 2005, the Holsten Group, before depreciation, net income profit/loss and tax on profits (EBITDA), generated results of 59.1 million euros (previous year 8.5 million euros). This increase in results is mostly due to significantly reduced costs regarding material, personnel, sales and other operational expenditure. Expenditure regarding fixed and financial assets, immaterial goods and company value was 35.6 million euros, 49.2% below the value of the previous year. The EBIT of the previous year of 166.3 million euros included the result of deconsolidations of 228.0 million euros. The EBIT of 2005 was at 23.5 million euros. Taking into account proceeds from interest and financial assets as well as financing expenditure, results before tax rose to 25.3 million euros (previous year: 151.6 million euros). Taking into account tax on profits of 10.1 million euros, annual surplus for 2005 is 15.2 million euros (previous year: 120.4 million euros).

In 2005, the other shareholders made profits of 0.2 million euros, while in the previous year they made a loss of 0.2 million euros. Furthermore, 13.3 million euros were added to the consolidated earned surplus (previous year: 85.8 million euros). After accumulated profits of 34.9 million euros in the previous year, the figure was at 1.7 million euros in the year under review. Annual accounts in financial year 2005 for Holsten-Brauerei AG showed accumulated profits of 29,512,438.65 euros. The board of directors proposes to use the accumulated profits of 1,650,000.00 euros for the distribution of a dividend and to transfer the remaining sum of 27,862,438.65 euros to other revenue reserves. This amounts to a dividend of 0.12 euros per individual share.

In the financial year just closed, a cash flow of 52.8 million euros was generated (previous year: 192.9 million euros). The results per share concerns 13,750,000 voting stocks and amounts to 1.09 euros, after 8.78 euros in the previous year. With regard to the annual rate-of-return figures, the deconsolidation which took place in 2004 had a particularly pronounced effect compared with the previous year. In 2005, the Holsten Group generated an equity return of 8.1 % and an operating margin of 6.5 %. The return on assets was at 3.8 %. The cash-flow-oriented return on investment was at 8.6 %.

In financial year 2005, Holsten Group invested a total of 23.0 million euros (previous year: 57.9 million euros). This decline is partly due to a changed basis of consolidation and partly because two PET bottling plants were purchased in 2004. The investments were financed by a cash flow of 52.8 million euros. Mostly technical replacement investments were made for the plants, especially in production and logistics.

Asset and financial position

The total assets of the Holsten Group rose from 592.8 million euros by 3.2 % to 611.5 million euros. Long-term assets decreased from 300.9 million euros to 282.8 million euros; their share of the total assets was thus 46.2 % (previous year: 50.8 %). The group’s long-term assets are 110.9 % covered by equity capital (previous year: 101.3 %). Short-term assets rose by 12.6 % to 328.7 million euros. This rise is mainly due to an increase with regard to receivables and other assets. The largest proportion came from receivables from associated companies, which were at 251.6 million euros (previous year 205.9 million euros). The equity capital of the Holsten Group at the end of the financial year was 313.6 million euros (previous year: 305.3 million euros). 13.3 million euros of the group’s annual surplus of 15.2 million euros will be transferred to other revenue reserves. The group’s remaining accumulated profits are 1.7 million euros. The new company structure only contains minor shares of other shareholders. The equity ratio of 51.3 % in the year under review remained at the level of the previous year (51.5%).

Employees

On 31 December 2005, Holsten Group had 1,434 employees. That is 10.8% fewer than in the previous year. The decline in number of employees is due to the restructuring process initiated in 2004.
49 of the employees were apprentices. All apprentices whose training finished in 2005 were offered terminable employment.

Forecast

The board of directors is planning to improve the company’s competitive position in northern and eastern Germany and to attain or further develop leadership in certain markets. All measures are therefore aimed at innovation, profitability and continuous improvement. New products such as Duckstein Weizen and Lübzer Urkraft, and new packaging types such as the Astra Urtyp and Holsten Edel 8-pack are designed to facilitate this development. The overall aim remains to increase the company’s profitability.

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