Ladies and gentlemen, welcome to the Carlsberg Q1 2018 trading statement, hosted by CEO Cees 't Hart and CFO Heine Dalsgaard. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. As a reminder, this call is being recorded. Speakers, please begin.
Good morning, everybody. Welcome to Carlsberg's Q1 2018 conference call. My name is Cees 't Hart. I have with me CFO Heine Dalsgaard and Vice President of Investor Relations, Peter Kondrup. I will go through the highlights of the quarter. Heine will talk you through the regions and outlook. Please turn to Slide 2. Quarter one is traditionally a very small quarter for our business due to seasonality. Organic net revenue in the quarter grew by 2%. This was driven by a 1% price mix and 1% organic volume growth. Reported volumes were flat due to last year's divestment of the German wholesaler Nordic Getränke. Reported net revenue declined by 5% due to the disposal and the negative currency development. The negative currency impact was broad-based, with the largest impact from Asian and Eastern European currencies.
We confirm our full-year expectations for organic operating profit growth. Please turn to Slide 3. A few comments on our international premium brands for which we saw good growth. 1664 Blanc continues its strong performance and grew by 44%, even after having achieved 46% growth in 2017. Further expansion in our Asian markets is an important driver of the brand growth. Growth also picked up in Eastern Europe, where Russia delivered strong growth of the brand. Grimbergen also continues its double-digit growth and grew by 12% in the quarter. The growth came from Western Europe, with particularly strong results achieved in France. Tuborg, our largest brand, grew 11%, supported by strong growth in India and China. The brand also grew in several markets in Western Europe, such as Denmark, Norway, Serbia, and Bulgaria.
In Denmark, the growth was achieved in spite of a price increase as consumers traded up into more premium Tuborg line extensions. In Turkey, our partner has done a very successful job, making Tuborg one of the largest beer brands in the country. Volumes of the Carlsberg brand were flat as strong growth in Asia and growth in Eastern Europe were offset by volume decline in the U.K. Please turn to Slide 4. A brief update on a few of our strategic priorities, which are also receiving significant support from our SAIL'22 investments. The growth trajectory in the craft and specialty category continues. We grew our brands by 30%. Russia, France, China, Poland, and the Nordic markets were the main drivers of the growth.
Alcohol-free brews grew by 23% in Western Europe, with strong growth rates for our alcohol-free brands in markets such as Poland, France, Denmark, Sweden, Norway, and Germany. In Russia, Baltika 0 also achieved strong results in the quarter. Lastly, the rollout of our proprietary one-way draught system, DraughtMaster, continues. DraughtMaster ensures consistent, high-quality draught beer and the ability to have more taps in the outlets, leading to higher craft and specialty sales. As a result, our customers see an improved income and much easier operation. We continue to see very strong progress in Italy and Denmark, and we have now also launched the system in Norway and Sweden, where initial customer interest has been encouraging. Within the Big City Priority, we are now live in a handful of cities where we test different concepts and gain valuable learnings.
We have decided not to provide any further updates on the Big City Strategy as our activities remain very commercially sensitive. The priority is a slow burner, it will not have any material top-line impact for the next years. We would like to stress that of our growth priorities, the short to medium-term growth will come from craft and specialty, continued growth in Asia, and growing our presence in the expanding alcohol-free beer segment. With that, I will hand over to Heine, who will take us through the regions and outlook.
Thank you, Cees. Good morning, everybody. Please turn to Slide 5. Western Europe. Net revenue declined organically by 3% as a result of a total volume decline of 2% and a negative price mix of 1%. Reported revenue declined by 8% due to last year's disposal of Nordic Getränke in Germany, which had an impact of -3% and a negative currency impact, primarily related to non-euro-linked currencies, with the largest impact coming from the CHF, NOK and SEK, and then the PLN. We saw a positive price mix in most countries, our export and licensed business distorted the regional numbers for the quarter due to lower export and licensed sales in the Middle East and growth of Tuborg brands in Turkey. Sales in the Middle East was impacted negatively by increasing excise duties and VAT in some of the markets.
In Turkey, where Tuborg is sold by our partner through a license agreement, we only include the license fee in our revenue, and consequently, that impacts regional price mix negatively. Adjusting for export and license, price mix in Western Europe was close to +1%. Volumes were impacted negatively Markets. Our volumes in the Nordics grew by mid-single-digit percentages, supported by the relisting at a large customer in Finland for the winter campaign. In Denmark, our beer business developed well, and our value share showed solid improvements driven by value management and strong growth of craft and specialty and alcohol-free beer. In Norway, the positive development continued with particular solid performance of our specialty products, although the CSD business was impacted by a significant sugar tax increase. Sweden started the year well, mainly due to the earlier sell-in to Easter.
In France, our craft and specialty portfolio continued to develop positively with strong growth of brands such as 1664 Blanc and Grimbergen. The mainstream category remains under pressure, consequently, our volumes declined slightly. In Poland, our volumes declined, and we lost market share following a price increase in Q1. However, our price mix improved as a result of this, as well as our premiumization efforts. The U.K. was impacted by the continued challenges of the Carlsberg brand, but we saw healthy growth of Brooklyn and San Miguel. In some of our smaller Western European markets, such as Bulgaria, Greece, and Serbia, we delivered solid results. In the quarter, we acquired the remaining 49% of Olympic Brewery in Greece. Please turn to slide six and Asia. We had a strong start of the year in Asia.
Net revenue grew organically by 16%, driven by 12% volume growth, and a +3% price mix. Reported net revenue grew by 6%, negatively impacted by currency movements. We continue to see strong results in our largest market, China. Supported by 14% growth of our premium portfolio, combined with a later sell-in to the Chinese New Year, our Chinese volumes grew by 9% and net revenue by 16%. All three major brands in our premium portfolio, that is Tuborg, Carlsberg, and 1664 Blanc, delivered solid growth rates, with 1664 Blanc taking the lead with more than 50% volume growth. Our Indian volumes grew by more than 30% due to market share gains and also very easy comparables as Q1 last year was weak, being impacted by the highway ban.
In most of the other markets in the region, we saw good momentum of our business with particular strong performance in Laos, in Nepal, and in Vietnam. In general, we are very satisfied with the progress of our Asian business. Q1 was extraordinarily good due to the later sell-in to the festive season, but underlying performance of most markets is very strong, and we are investing a sizable portion of our SAIL'22 investments in the region to further drive volumes and premiumization. Slide seven and Eastern Europe, please. Net revenue in Eastern Europe declined by 3% due to 6% volume decline and +3% price mix. All markets, with the exception of Russia, grew volumes for the quarter. Reported net revenue declined by 14% due to the weaker currencies across all markets. The Russian market declined by an estimated 4%-5% for the quarter.
We delivered flat market share sequentially of around 31%, but we saw a market share decline of approximately two percentage points compared to Q1 last year due to the market share loss in the low-end PET segment during the summer. Consequently, our Russian volume declined by 11% for Q1. Our price mix developed favorably by low single-digit percentages in spite of the continued promotional pressure in the PET segment. All other markets in the region continued the very positive trajectory of last year, delivering 6% volume growth and 19% revenue growth as a result of strong pricing and growth of our premium offerings. In Ukraine, we had a very strong start to the year driven by market growth and solid market share performance. Please turn to slide eight and the outlook for the year.
Based on the Q1 performance, we are well on track to deliver on our earnings expectations for the full year. Consequently, we maintain the outlook of mid-single-digit % organic growth in operating profit. Based on the spot rate on April 30th, we now assume a negative translation impact on operating profit of around minus DKK 550 million. The change versus February FX is mainly due to the recent weakening of the Russian ruble. All other assumptions remain unchanged. Cees, over to you for final remarks.
Thanks, Heine. Before we open for questions, a few final remarks from my side. We are satisfied with our performance in Q1. We see solid growth in our key strategic priorities, such as craft and specialty and alcohol-free brews. We are well on track to deliver top and bottom-line growth for 2018. Finally, we maintain the outlook for the year. With this, we are now ready to take your questions.
Thank you. Ladies and gentlemen, if you do have an audio question for the speakers, please press zero one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. Our first question comes from the line of Jonas Guldborg from Danske Bank. Please go ahead. Your line is open.
Yeah. Good morning, gentlemen. Thank you for taking my questions. Firstly, if you could add some additional comments on your market share losses in the U.K., to what degree this is a cause for concern, and maybe also including how did the price mix develop in Q1 in the U.K. Secondly, some comments around how you read the Russian market decline in Q1. Does it change your expectations for a flattish full year development in Russia? Then thirdly, it sounds like if, from the comments on the festive seasons in Asian countries, that we should look at Q4 and Q1 in combination. If I do that, it looks like Asian volumes has organically developed flattish, but I guess that is due to the change of your accounting. So if you could put some comments on how the underlying growth was in Asia, adjusted for these later sell-in.
Thank you.
Okay. Thank you very much. Good morning, Jonas. Thanks for your questions. With respect to the market share in the U.K., the market share loss is mainly driven by, first of all, declining mainstream segment as consumers are trading up, and we over-index in mainstream. The second thing is that the Carlsberg brand continues to lose market share in the mainstream segment. We see Carlsberg Expørt doing better because of the new advertising. Carlsberg Green, as it is called, is continuing to lose market share, and we will come there, of course, with correcting measures. I don't have, at this moment of time, information about the price mix. Well, we have, but basically, I think that's too detailed for now. With regard to the market decline in Russia, in our estimation, it's 4%-5% if we compare that with Q1 last year.
Mainly, if we correct for the PET downsizing, we think the market has been flattish. We don't change our view on the Russian market, where we have said that we will be around zero this year in terms of volume. In Asia, frankly, you can cut the market and the year every time in different pieces, of course. We are very satisfied with the development of our Asian market. Obviously, we have, and that is a bit later, you have some of the trade loading in Q1 rather than in Q4. If we combine it and if we look at China, India, if we look at our market share development, if we look at the different price mix developments, we are very satisfied about Asia.
Okay. Thank you.
Thank you.
Thank you. Our next question comes from the line of Sanjeet Aujla from Credit Suisse. Please go ahead, your line is open.
Hi. I'd just like to come back to Russia. Can you just discuss the pricing environment there? Clearly, you've been running with a big price gap with your competition driving some of the share losses that you've seen. Are you seeing any signs of the pricing environment improving there?
Thank you, Sanjeet. Good morning. No, we have not seen any changes in the pricing environment. Maybe it's a bit too early because this is the moment in the season that price increases are being taken. Obviously, we are monitoring that closely. With regard to the way we operate is that we participate in some of the deep promotions in some of the key accounts, by which we have been able to stabilize our share development in Q1.
Got it. Can you just also discuss your market share performance in the premium segment in Russia? Just to follow up on the Nordics, what would your volumes have been if you exclude the contract benefit in Finland?
The share performance in premium is continued to improve in Russia. In terms of the volumes, if we would not have the contract in Finland, the volumes would be flat in Nordics.
Got it. Thank you.
Yep.
Thank you. Our next question comes from the line of Søren Samsøe from SEB. Please go ahead, your line is open.
Yes. Good morning, gentlemen. First, a question regarding the strong growth that you mentioned you have in some of your scalable premium brands like Grimbergen and the 1664 Blanc. Is this a direct result of your SAIL'22 strategy? In regards to that, would you say that you are in line or are you slightly ahead or slightly behind the plan that you set out for now?
Thanks, Søren. Yes, I think we can really say that this is a consequence of our investments of SAIL'22, both in Grimbergen and 1664 Blanc. It has to do as well with the roll out in different countries. As we said two years ago, especially Grimbergen was doing very well, but only in four or five countries. As we discussed before, we have now moved to other countries with Grimbergen and as well with 1664 Blanc, and we see the success coming through, which is very encouraging.
Okay. I couldn't help noticing that you have moved up Asia
As the division you report as the number 2 division now, which I think is the first time I've seen that. What should we read into this? Why did you choose to do that now?
Maybe not now. We talked earlier about this, that we always get a lot of questions about Russia and a lot of focus. At the moment you see that Asia now is basically our second region. It, of course, is then the second region that we should mention. Basically it shows as well how fast Asia is growing and how well we're doing there.
Thank you very much.
Thank you. Our next question comes from the line of Mitch Collett from Goldman Sachs. Please go ahead. Your line is open.
Hi there. At the full year stage, I think you weren't keen to commit to the 2%-4% organic sales growth range this year.
We can't hear you, Mitch.
Apologies. Is that better?
Yeah, that's better, Mitch.
Sorry. At the full year stage, you weren't keen to commit to the 2%-4% organic revenue growth aspiration in FY 2018. You started with a two against what was one of your harder comps. Would you be willing to commit to 2%-4% organic sales growth at this stage? Perhaps, can you just talk a bit more about the acceleration in Tuborg, which has gone to 11% growth in Q1? I think it was running at 3% last year. I suppose given that's your biggest brand, what is the offset for that Tuborg growth and why hasn't growth overall accelerated? Thanks.
I'm not sure I got your last part of the question, but the first two. In terms of the 2% to 4%, as you probably recall, is that we said that that will be a CAGR for the coming years, 2% to 4%. We don't guide on the top line for this year. With regard to the acceleration of the Tuborg brand, that's very much due to India. We had the highway ban in 2017 in Q1, as you will recall, and we grew in India this year in Q1 by 30%, but on an easy comps. I look at Peter, whether he got No, he didn't get your third question as well. Either you need to repeat that or we move to the next.
Yeah, I just wondered if, with Tuborg accelerating so much, given it's such a big brand, which other brand is getting slightly worse to offset that acceleration?
Which other brand has offset? Well, basically, due to the fact that the main growth comes from China, where we grow with our total portfolio, and from India, where Tuborg, next to Carlsberg, is one of our main brands. It doesn't basically eat in other volumes from other brands.
Okay. Understood. Thank you.
Yep.
Thank you. Our next question comes from the line of Trevor Stirling from Bernstein. Please go ahead. Your line is open.
Morning, Cees and Heine. Two questions from my side, please. The first one, if you talk a little bit more about China, Cees, and what the underlying trends in China are. Is it still fair to say volume flattish may be slightly down, but very strong price mix? The second one, I think I know the answer to this, but any update on Habeco?
Good morning, Trevor. Thanks. To start with the last one, there's no news on the Habeco deal. We continue to have a good dialogue with the government. That's where we leave it for now. With regard to China, we see their 14% growth of our premium portfolio. The Chinese volumes in total grew by 9% and net revenue by 16%. We seem to have a good momentum in that market as we speak. 20% of our volumes is in premium. That's 40% of our net sales. Our total international portfolio grew by a set 14%, of which Carlsberg 8%, Tuborg 14% and Blanc 53%. I hope that gives a bit of color to you.
Thank you very much, Cees.
Thanks, Trevor.
Thank you. Our next question comes from the line of Michael Rasmussen from ABG Sundal Collier. Please go ahead. Your line is open.
Thank you. I would like to follow up a little bit more on the Habeco question just after, if possible. I do understand that there's been some issues with the Sabeco deal. Can you please elaborate a little bit about this, if this has changed your willingness to go ahead and increase the stake or potentially, you will come into some kind of price negotiations or just move along as in the past? Also my second question will be on the new potential PET ban in Russia. Can you add a little bit of flavor on how that process is moving, what your guys talking to the Duma members and so on are saying here, please? Thank you.
Yeah. Thank you. With regard to Habeco and Sabeco, well, we obviously monitor, like you, what's happening with Sabeco, but there's nothing at this moment of time I can say more about it. You have the same information, I guess, that we have, and we continue to have our good dialogue with the government. With regards to the proposal of the PET sizes. A few members of the Duma have proposed to further reduce the maximum size of PET bottles, as you have read. There's not set any date for first reading in the Duma, and as we understand it, the proposal is not backed by the government at this stage.
I will be in St. Petersburg with the SPIEF in early May. There, of course, we will have talks with members of the government. I might even be allowed to raise a question in the meeting with President Putin again. This case on PET has started already eight or nine years ago. These kind of steps can take quite a while, but there's no further update for now.
Thank you very much, Cees.
Thank you.
Thank you. Our next question comes from the line of Olivier Nicolai from Morgan Stanley. Please go ahead, your line is open.
Hi. Good morning. Just got 2 questions on India, please. You had a 30% volumes growth in Q1. Which states were the main driver behind this volumes growth? Also, are you aware of any further regulation in 2018? I know that some of your peers, for instance, mostly in spirits, to be fair, mentioned some route to market changes which affected their sales in some states. Thank you.
Olivier, I got your first question, not your second. Let me first take your first question, and then you might want to repeat your second one. When we talk about the states, it's a bit mixed. This has a lot to do with where the impact of the highway ban was the highest. We have seen a recovery in almost all states, just because of the highway ban recovery. We see the numerical distribution in many of the states coming back significantly. We are not yet on 100% in any state. We are, I think, on average between the 75% and 80% with regard to the numerical distribution in Q1 2018 vis-a-vis 2017. We're on our way back.
Perfect. My second question was really about if you are aware of further regulation in 2018. We've seen GST, we've seen highway ban. Is there anything coming up in 2018 that you're aware of in India?
Yes, in general, we don't see further announcement of regulations to come up. We see a tax issue in West Bengal. There probably will be an increase in the excises.
Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Hans Gregersen from Nordea. Please go ahead, your line is open.
Good morning. Heine, if I heard you correctly, you stated that you are well underway with Q1. Does that mean, without going into specific numbers, that Q1, from an EBIT point of view, did better than you had forecasted as the first question? The second part is, if you look on Asia, you have for quite some time delivered very strong organic growth. The point is, how much operating leverage can we see that driving into the margin over a five-year horizon as the second question? Thirdly, how many new big cities, although not a part of the Big City Program, have you added into China? Then finally, Cambodia, is any new status on the turnaround progress? Thank you.
Well, let me start, Hans, good morning, with the question on the outlook for the full year. You're right that we're well underway in terms of delivering and continuing our progress and success with Funding the Journey. Q1 is basically in line with our expectations, and that also means that we're continuing the journey towards delivering in line with our full year guidance. In terms of Asia operating leverage, yeah, you're right that it does help on profitability to have a higher volume growth and revenue growth, clearly. It's not something we comment on specifically.
Heine, could you then give a little bit further insight in a different way? Can you give, not in number terms, but verbally, how much are you over-investing in the region to drive growth? How long will you, or will you continue to do that, let's say, for the next three years?
First of all, we're not over-investing in the region at all. We are allocating, which is perfectly in line with SAIL'22. We are allocating quite a bit of our SAIL'22 money into the region, and in particular, into China and into India. It's in line with our expectations, it's in line with SAIL'22, it's definitely not over-investing, and it's paying off. This is one of the reasons why we have the strong growth we have.
Hans, with regard to the big cities outside our big city program, basically these are the big cities indeed in China, in Eastern China. We talk about 10 cities there. With regard to your question on Cambodia, we are working indeed on a turnaround plan, we have not seen basically the evidence of success of that yet, that's too early to say.
Thank you.
Thank you. Our next question comes from the line of Richard Withagen from Kepler Cheuvreux. Please go ahead, your line is open.
Yes. Good morning, gentlemen. I've got two questions. First of all, can you talk a bit about the dynamic of price mix, I think especially in the Nordics and France. If you look at your numbers, you obviously mentioned the Middle East and Turkey effect, but then also U.K. and Poland were weak, and I think those are markets where your revenue per liter is relatively low. Does that mean that your price mix in the Nordics and France is quite strong? Is that mainly mix or is there also an element of price in there? The second question is on Russia. Baltika announced some new initiatives with Burger King and Teremok. Is that part of strategies to expand distribution or increase exposure to different channels in Russia?
What kind of beers are predominantly sold in these outlets, and what will be the impact on price mix?
Okay. With regard to the dynamics in Europe, indeed, we had a positive price mix in Nordics and in France. If we take out the U.K. and Poland, we talk for Europe about a price mix improvement of plus 1%. With regards to Baltika in Burger King, yeah, obviously we do want to be where the consumers consume or shop, and that means as well that we use these kind of channels. It's very much on Baltika Zero. The more Baltika Zero we sell, the better it is for our price mix.
Very clear. Thanks, Cees.
Yep. Richard.
Thank you. Our next question comes from the line of Edward Mundy from Jefferies. Please go ahead. Your line is open.
Hi, morning everyone. Just two questions, please. You're keeping your Russian market guidance of flattish for the year despite Q1 down 4% to 5%. Have you seen evidence the market has improved in Q2? The second question is on Western Europe, where you're flagging the negative mix from Tuborg growth in Turkey. What was the impact of Tuborg exports on your volumes in Q1 in Western Europe?
On the first one, where we talk about Q2 in Russia, well, we had a good start of April. That's not so much the issue. Why we're confident is that basically we kept our share. We had a negative or a difficult comps versus Q1 2017, and the huge volume and share decline in Russia started in Q2 and basically continues in Q3. Why we are confident to come back to more or less zero is because we have a trust that we keep our market share, and we have other comps more difficult than in Q1. On Tuborg Turkey, well, we are dealing there as a partner. You can imagine that we don't give specific details on that one.
Okay, thanks.
Thank you.
Thank you. Our next question comes from the line of Laurence Whyatt from Société Générale. Please go ahead. Your line is open.
Hi, good morning. Thanks very much for the questions. Firstly, in Vietnam, following the investment from ThaiBev into Sabeco, I wonder if you've seen any change in market practices from your competitive landscape. Secondly, in the U.K., following the announcement of the Sainsbury's Asda potential merger, I was wondering what impact you think that might have on the U.K. supermarket landscape. Thirdly, following, we've had a number of months of the ABI EFES merger in Russia or the joint venture. I was just wondering if you've seen any changes in the competitive landscape there as a result of that one. Thank you very much.
Okay, Laurence, thank you very much. I must admit that probably there are three times no change as an answer. In Vietnam, I think it's too early. Sabeco is basically taking over, as you know, at the beginning of the year, and management needs still to come in, as far as we have been informed. So, no change. In the U.K., while the deal has been announced on Monday, obviously our teams are looking at it, but no answer on that one. ABI EFES, we have not seen any combined efforts in the market yet.
Thanks. Just to confirm then on Sabeco, you are expecting a management change following the ThaiBev investment?
I guess if you take over a company for that kind of money, you want to run it yourself. Yes, we expect that.
Excellent. Thank you very much.
Thank you, Laurence.
Thank you. Our next question comes from the line of Eddy Hargreaves from Investec. Please go ahead. Your line is open.
Good morning. Apologies for moving straight down into your third division. A couple of questions on Russia. One is, can you give us any sort of steer as to your expectations around the World Cup phasing of sales, profit, marketing over Q2 and Q3? Just more broadly how you expect that to pan out. Secondly, just very simply, could you say what your capacity utilization is now at Baltika? The second question is regarding Poland. Apologies if I missed it. Could you indicate what the size of your price increase has been and what the volume decline has been in that market, please?
Okay, Eddy, thank you very much for your questions. With regard to the World Cup. That will be mainly played in Q2. There will be the main activities and as well the cost. We are not the main sponsor, as you know. We expect the main sponsor to activate the sponsorship, which may have a positive impact on their market share. Obviously we have activations as well. We are looking forward to the tournament. The second question?
Was the capacity utilization.
Of course, yeah. That's between 50% and 60%. That has not changed significantly because we basically produce more volume, so more bottles run over the line. In the brewhouse we have a lower utilization. On the lines it's even slightly higher. I look at Peter for the third question because he is calculating that as we speak. You talk about a 4% positive price mix.
4% price mix in Poland. The volume performance?
Well, that went down as we said, we will come back to you later on that one.
Okay, cool.
Thank you. Our next question comes from the line of Frans Hoyer from Jyske Bank. Please go ahead. Your line is open.
Thanks very much. This contract in Finland, was that a factor in the price mix erosion in Western Europe, and if so, how much?
Yes, it has impacted our price mix in Europe. Frankly, I don't know by how much now.
A small effect. Okay.
A small effect, yeah. Basically, if we move to that kind of detail-
Yeah
We don't want to disclose all these kind of things because that talks then as well about the contracts.
Okay. I don't know if I misunderstood your comments on the big cities effort. Are you pouring cold water on that effort? Are you changing your plans on CapEx and so on in that area?
No, not at all. No cold water. The only thing is we have an early success there. We learn a lot from it, but we just want to basically develop that in peace. At the moment, if we are going to talk too much about cities success, then that will of course instigate competitive reactions. That's the reason. In terms of CapEx, we have never said that we would put a lot of CapEx in that. It's asset light, but we are still firm on that big city project.
No changes to the spending behind those efforts?
No.
Thanks for clarifying that. Thank you.
Sure.
Thank you. Our next question comes from Andrea Pistacchi from Deutsche Bank. Please go ahead. Your line is open.
Yes, good morning. Two questions, please. First one on Russia. I realize Q1 is a small quarter, but why do you think the market hasn't really improved yet there, as the downsizing should have played out by now? Second question on Vietnam and new management there. Besides the PET timing, are you seeing an underlying improvement in the business there? What is the new management doing differently? Thanks.
Thank you. With regard to Russia Q1, well, it depends on how you look at it. If we look at it and correct for the PET ban, you could argue that the market is now stable, which is already very different from in the past. In that respect, we don't feel that it's a negative news on Q1 with regard to the market development. On Vietnam, yes, we have new management. We see improvement basically in almost all the levers on the business with regard to how to run a business operationally. We have renewed some of the contracts with wholesalers and distributors. We are improving our distribution. We are moving to better price segmentation and discipline in the market. We see there a good impact of the new leader in Vietnam.
Sorry, can I just on Russia, you're saying the PET, the downsizing is still having some sort of tail end effect? In Q1 it wasn't completely in the base yet?
Yeah. The big change was in Q1 2017, we're now hovering against Q1 last year, there is some impact. In Q2, we expect that there was not any, let's say, impact of PET anymore, we see better underlying development of the market.
Thanks.
Thank you very much. Can we have the last question, please?
Absolutely. The last question comes from the line of Simon Hales from Citi. Please go ahead. Your line is open.
Thank you, gents, for taking the final question. Can I just ask about your full year guidance? I appreciate that obviously the Q1 performance was in line with your expectations. I wonder whether the mix of delivery in Q1 was different to what you expected sort of three or four months ago, i.e., it was better in Asia and a little bit tougher than you thought in Europe. If that is the case, how do you think about the full year mid-single-digit organic EBIT growth guidance? Are you expecting a little bit more now perhaps from Asia and a little bit less than Europe than you expected three months ago?
Thank you, Simon. I think that's an excellent question for Heine.
Yeah. You're right. Q1, as said before, was in line with our expectations overall. It's clear when you look at the mix, there are some different elements into it. Overall, there are many moving parts in our profitability and in our mix and in our volume and in our revenue. We do not comment specifically on the individual sort of elements of the full year guidance. Basically, full year guidance remains mid-single-digit growth in operating profits. A lot of moving parts, some pluses and some minuses. It's basically our task to make sure that negatives are balanced off against positives so that whenever we see movements, and there is a lot of movements, that we initiate gap closing plans, and that's what we do. Overall, confirming our full year guidance.
Okay, thank you.
With that confirmation of the full year guidance, we conclude the call. This was the final question for today. Thank you for listening in, and thank you for your questions. We are looking forward to meeting some of you during the coming days and weeks. Have a nice day. Thanks a lot.