Valuation of Carlsberg A/S: A Strategic and Financial Analysis of Carlsberg Considering the Effect of the Operational Restructuring Program SAIL'22 on the Company's Operating Performance and Share Price

Theresa Haffer & Annika Mercy Kunz

Student thesis: Master thesis


The thesis answers the research question: What is the estimated value per share of Carlsberg as of 31st December 2017 considering the restructuring initiative SAIL’22? To answer the question, first a strategic analysis of the macro- and micro environment is conducted followed by a profitability analysis based on Carlsberg’s historical performance. The analysis help to identify value drivers which are then taken into account when forecasting Carlsberg’s future performance. Finally, this input is used to calculate the enterprise value applying the Discounted Cash Flow model as well as the Economic Value Added approach. During the course of the thesis a special focus is put on the company-wide operational restructuring program SAIL’22 that Carlsberg currently conducts. On the one hand, we consider the potential effects of SAIL’22 when assessing the business environment and when forecasting future performance. Measures within SAIL’22 aim to make the company more successful by driving sustainable growth and more efficient through streamlining processes throughout the value chain. By taking a closer look at the specific activities we derive the expectation that SAIL’22 will enhance an increase in revenue and a reduction in costs. On the other hand, we calculate the effect of the restructuring initiative on the shareholder value. A literature review about corporate restructuring identifies reasons restructurings are conducted and factors supporting a successful implementation and execution. The research further reveals different opinions on the effect of restructurings on the shareholder value. Expectations often deviate from concrete evidence regarding the success of restructuring activities. Main goal within SAIL’22 is to enhance shareholder value and therefore increase operating performance. We thus calculate the effect of SAIL’22 on the return on equity. To isolate the restructuring effect from uncontrollable macro-economic events that influence the company as well as from an increased performance that was expected before the introduction of SAIL’22, we apply a formula developed by Smart and Waldfogel (1994). Excluding all effects not related to SAIL’22, we receive a positive influence of the restructuring activities on Carlsberg’s operating performance. Increased shareholder value is mostly reflected in the share price. Therefore, we analyze the development on and after the day of the announcement of SAIL’22. The decline of the share price on the day of the announcement reflects a rather negative perception of shareholders towards the restructuring initiative. This supports the result of our valuation: The DCF- and EVA-models estimate an enterprise value of DKK 173.442 million and a value per share of DKK 942,99. We thus conclude that the share price is currently undervalued. The underestimation is in line with the reluctant reaction of the share price and supports the assumption that the share price will increase with the preceding of SAIL’22 and the successful implementation of activities. An increase of the share price can already be seen: Since the day of the announcement the share price has increased from DKK 592 to DKK 745 per share in December 2017.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2018
Number of pages195
SupervisorsSvend Peter Malmkjær