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Fitch upgrades Carlsberg on strong business profile

Fitch Ratings on May 16 upgraded Carlsberg A/S's long-term issuer default rating and senior unsecured rating to BBB+, citing the Danish alcoholic beverage brewer's strong business profile.

The rating agency also upgraded Carlsberg's short-term issuer default rating to F1 from F2, while the outlook on the company's issuer default rating is stable.

Fitch said the upgrade is based on its expectation that Carlsberg will maintain the improved credit metrics it achieved after deleveraging in 2016-2018, which, according to the agency, is underpinned by the company's conservative financial policy and clear capital allocation principles.

The upgraded rating continues to incorporate some room for bolt-on mergers and acquisitions as Fitch believes the group will continue to pursue opportunities in Asia.

Meanwhile, the agency forecasts a deceleration in the company's organic sales growth in 2019 due to the absence of one-off supporting factors, such as favorable weather in northern Europe, World Cup in Russia and a rebound in India. Fitch said it expects Carlsberg's organic growth to come primarily from Asia due to more favorable market fundamentals than in mature western Europe and sluggish eastern European markets.

Fitch added that Carlsberg's commitment to a conservative capital structure also contributed to the rating upgrade. The agency said it expects the brewer to continue to return excess cash to shareholders through share buybacks and dividends. Carlsberg earlier announced a share buyback program after recording an increase in profit in 2018.