Peter Kondrup - VP, IR Cees 't Hart - President & CEO Heine Dalsgaard - CFO Chris Warmoth - EVP, Corporate Strategy

Michael Rasmussen - ABG Sundal Collier Soren Samsoe - Seb Equities Simon Hales - Barclays Capital Jonas Guldborg - Carnegie Investment Bank Hans Gregersen - Nordea Markets Richard Withagen - Kepler Cheuvreux Tristan Van Strien - Deutsche Bank Olivier Nicolai - Morgan Stanley Andrew Holland - Societe Generale Carl Walton - UBS Cees 't Hart: Good morning, everybody, and welcome to Carlsberg’s First Half Year 2016 Results Conference Call. My name is Cees 't Hart, and I have with me our new CFO, Heine Dalsgaard, Executive Vice President of Corporate Strategy, Chris Warmoth and Vice President of Investor Relations Peter Kondrup. Before we go through the half year results in details, we will give you an update on our strategic priorities. Please turn to Slide 3. An important milestone for the Company was the launch of our new strategy SAIL'22 in March. I am pleased with the way it has been received across the organization. As we expressed in the presentation of our new strategy, our ambition is to become a successful Company. The key KPIs to measure our progress towards becoming that are gross profit optimization margin, operating profit and market share. We want to strike the optimal balance between these KPIs as we believe that striking this is key in order to drive sustainable top and bottom-line gross, going forward. Therefore, we are also building them in to our plans, and they are integrated in to incentive schemes. Looking at the first six months of this year, we delivered a very solid GPaL margin improvement of 140 basis points, which is mainly driven by favorable price mix. On organic operating profit growth, we also saw a solid delivery of 8%. This was driven by the GPaL growth, and tight control of SG&A costs. We estimate that our market share was stable in Asia increased sequentially in Eastern Europe and to decline in Western Europe. All-in-all, volumes decline organically by 1%. This decline was partly due to some deliberate decisions to go out of dilutive volumes, in support of margins and profits. For the six months, we were very close to getting the balance in the golden triangle right. However, we need to make a little adjustment to ensure that our market share doesn’t slip too much. All-in-all, we are pleased with the good performance so far this year and we are confident with the progress of Funding the Journey and SAIL'22. Before I hand over to Chris for the review of the progress of our new strategy and Funding the Journey, I would like to comment on a few changes in the Executive committee, in support of the strategic and operational agenda of the group. Chris, who will present in a moment, has been appointed Executive Vice President of Corporate Strategy, Graham Fewkes took over Chris’s position as Head of Asia, Michiel Herkemij, who joined Carlsberg in April, is now responsible for Western Europe and as you already heard, Heine has joined us as CFO. I will now hand over to Chris for an update on SAIL'22 and Funding the Journey. Following with Heine, which he will go through the key financial data for H1. Chris?

Thank you, Cees 't. Please turn to slide four and a few comments on the progress of our strategy. We launched SAIL'22 in March, and have received positive feedback throughout the organization. Because SAIL'22 was co-developed with our top 60 leaders, we’ve been able, within a very short period of time, to share and explain the strategy with our employees in both central functions and across all our markets. We’re now actively implementing the strategy. We have established work streams, and appointed dedicated teams to drive each priority forward. On top, SAIL related initiatives are being incorporated into current activities and are being reflected in the planning for 2017 and beyond. So we’re seeing good traction behind SAIL'22. Slide 5 please and Funding the Journey, where the program is progressing well. Funding the Journey covers four key areas value management, supply chain, OpEx and rightsizing. And for each, we've developed detailed output KPIs, supported by specific projects with their own metrics. At the heart is funding the journey is having quality and consistent data making sure that this data is readily available and regularly published for those who need it and then most importantly driving a rigorous monthly routine to assess progress and find opportunities using a zero base mindset. This formula of quality data readily available and routinely monitor is proving fruitful. A few specific comments on each of the four key areas. On value management, as Cees 't already mentioned, our approach is helping us find a more optimal balance between volume market share and profitability. By leveraging a range of focused and appropriate tools and a series of good metrics we're delivering a more profitable mix of brands, channels, pack sizes and promotional activities. Our progress is reflected in the first half with its strong 5% positive price mix and the 50 basis points organic margin improvement. On supply chain efficiency we have specific programs and products production, material costs, logistics and savings from specification changes. Delivery of savings is well on target and we see good development on COGS and logistics, with both being down in Asian and Western Europe and the increase in East Europe is due to material price increases related to currency. Another example of progress is progress is SKU rationalization, where we're touching tail SKUs. We've so far deleted 2,107, with more to come and we are now taking the next step, which is to roll out a program addressing SKUs which prevents particular inefficiencies in the total supply chain, so called paying SKUs. Within operating expense efficiency 2018 white collar employees have left are being notified since the start of the plan. We've almost continued the transfer of well over 200 roll outs from Europe to our external service provider in India and are now working on additional similar opportunities. OCM or operating cost management is also working for us. Costs are organized in to 15 cost groups and then in to about 150 sub groups. Each cost has the local and regional owner. And cost stream owners then look at their groups horizontally across the organization, all travel costs, all facilities costs, all professional fees, all training costs, all maintenance costs, and so on. This yields new insights and new savings. In terms of rightsizing, a number of actions have been taken, on top of what we did at the end of 2015. This year, we've closed six sites in China, which brings the total number of closures to 11. We have continued the restructuring of our UK business now seems June the intention to allow cost secondary logistics operation. In addition, we've sold the Danish Malting Group, the Vung Tau brewery in Southern Vietnam; completed the Wusu asset swap in China; and have recently sold our shareholding in Malawi. So, in summary, we're making good progress in all the four areas and based on this progress within our plans of second half of the year, we anticipate to deliver this year around 1 quarter of the DKK1.5 billion to DKK2 billion Funding for Journey's benefits. Slide 6 please, and the three main regional priorities for the year, which we communicated back in February, these three priorities were margin improvements in Western Europe, continued growth in Asia and mitigation of the currency impact in market decline in Eastern Europe. For the first half of year, the status on these priorities is as follows. In Western Europe, we have improved price mix and GPaL margin and this led to an improvement in operating profit margin of 70 basis points. In Asia, we grew organic revenue by 4% in spite of a weak Chinese market and we delivered organic growth in operating profit of 6%. In Eastern Europe, we delivered 19% organic operating profit growth. However, we were not able to fully offset the combine marketing currency headwinds and the business delivered a decline in reported operating profit. And now I’ll hand over to Heine for the first half results.

Thank you, Chris and good morning everybody. Before I go through the half year results, I would just like to say that I am very pleased with being part of the Carlsberg team. We are at the beginning of implementing a new strategy and delivering on Funding the Journey and I am really excited to be part of this and to move the company forward. I am still in the process of getting to know the business and I look forward to meeting with our shareholders and analysts in the coming days and weeks to get your insight and views on Carlsberg. And now please turn to Slide 8 for a few financial highlights. For the first six months, we delivered 4% organic net revenue growth as we benefited from a positive price mix in all three regions. The price mix of 5% was sufficiently strong to offset lower volumes, higher cost of goods sold and higher sales in marketing investments, so such an extent that operating profits grew organically by 8%. However, we faced quite significant headwind from currencies and in addition tax was negatively impacted by a one off expense that I’ll explain in detail later. Reported net profit grew strongly by 25% and so did free cash flow. We thus reduced net interest bearing debt by 2.7 billion versus year-end 2015. I’ll go through more detail on the following slide, so please turn to Slide 9. On this slide we show the development in net revenue, as you can see from the slide all three regions contributed positively to the organic growth and net revenue. The impact from currencies of minus 2.2 billion more than offset the organic growth and reported mid revenue decline by 4%. The currency impacts were primarily related to the ruble; the Chinese RMB; the British pound; and the Norwegian kroner. Then, please turn to Slide 10, and some flavor on the operating profit developments in the first half of the year. Again as you can see all three regions contribute the positive to the organic development in operating profit which in total was up 286 million or as said 8% compared to last year. Cees will go into more detail in shortly. So I’ll just make comment on the development in central costs. These were, as you can see from the slide, up 104 million to 7 million compared to the first half of the last year. This increase was mainly due to higher marketing investments than last year, as we incurred the final cost related to the EURO 2016 sponsorship. Consequently we have somewhat higher central cost in first half than in second half. We expect central cost to be broadly in line with last year. The currency impact of minus DKK389 million reflected adverse development in most currencies across our geographies with the most pronounced impact coming from the Russian ruble, resulting in a reported operating profit of 3.4 billion. Slide 11 please. On the individual P&L items COGS per hectoliter was up organically by 4%, this was mainly due to the mix transaction impact of input cost denominated in hot currency in Eastern Europe. The positive price mix of 5% but more than sufficient to offset the higher COGS as well as the lower volume and gross profit increased organically by 5%, measure per hectoliter gross profit was up organically. Operating expenses were up 3% to 4% organically and around 2% in reported terms. A main driver of the increase was sales and marketing costs as these was impacted by the UEFA EURO 2016 sponsorship. Special items amounted to plus 406 million, they were positively impacted by the single deal of the Danish Malting Group, and the asset swap of Wusu Beer Group in China. Opposing this were impairments and restructuring measures, particularly in the UK, China and also in India. In India the impairment was solely related to the brewery activities in Bihar, where the state with a state in April of this year implemented a complete ban on alcohol. Mid financials were minus DKK703 million. This was an improvement of 6 million to 7 million versus last year. This is explained by lower average funding costs and interest expenses defined by 135 million. Other financial items were up compared to last year as they were impacting by currencies and a one off charge related to the final ruling in a tax dispute we have had in Finland. Effective tax rate was 33% and there for higher than we expected at beginning of the year. The tax rate was negatively impacted by one of tax spend, expense related to a lost tax case in Finland. The case relates to a different opinion on tax payments in Finland in the year’s 2006 to 2010. We paid all taxes in 2010, appealed the case, but lost the appeal case earlier this year. Consequently, we now have to expense the tax. The tax expense has no cash impact of this year. Net profits was very strong at 1.867 billion, equivalent to an EPS of 12.2, it was positively impacted by special items which offset the negative impact from currencies and tax corrected for special items, after tax and also the effects of the one-off tax expenses, EPS, or earnings per share, would have been 11.2. Slide 12 please. And here are some comments on the DKK3 billion and free cash flow improvement in the first six months of the year. The free cash flow was 5.2 billion compared to 2.2 billion last year. This strong development was the result of better within capital management, lower net interest and tax paid in the first half of the year as well as the lower CapEx, in addition through the proceeds on the sale of the Danish Malting Group and the gross proceeds from the asset swap in China. Looking at the total working capital, the change was plus DKK860 million, comprising of plus DKK1.4 billion from trade working capital, and minus DKK0.6 from other working capital. The very strong improvement was partly due to our continued focus on reducing the ratio of trade working capital to revenue. On a rolling 12-month basis, trade working capital to net revenue was minus 7.5%. Other working capital was, among other, impacted by pension obligations primarily in the UK. Net interest paid was DKK119 million. This was a decline of DKK584 million compared to last year, which was mainly due to lower average funding costs, as well as the proceeds from settlement of financial instruments, which were positive this year, while negative last year. Tax amounted DKK869 million. This was a decline versus last year of DKK439 million. But the decline was due to an unusually high level last year, as well as lower taxable income this year. Net operating investments amounted to DKK1.480, and was mostly related to maintenance capacity in Asia and sales equipment in general. All-in-all, free cash flow was DKK3.8 billion an improvement over last year of DKK1.7 billion. Finally, financial and other investments were positively impacted by previously mentioned Danish Malting Group, and the asset swap in China. Please turn to Slide 13. As a result of the strong cash flow in the first half. Net interest bearing debt was down DKK2.7 billion, compared to year-end. Net interest-bearing debt-to-EBITDA was thereby reduced to 2.16 times by the end of the first half, bringing us in the right direction to watch the specific target of below 2 times. 83% of the gross debt is long-term, and 87% of the net financial debt was at fixed interest rates, as per end of June. It is here worth highlighting that we have a sterling bond of GBP300 million, at a coupon of 7.25 that matures this November. Slide 14 please. And here are some comments on invested capital and return on invested capital. Invested capital was down DKK21.9 billion in June versus end June last year. Around 40% of the decline was due to the significant impairments done in the second half of last year, as well as some in the first half of this year following the restructuring and rightsizing initiatives on the Funding the Journey. The remainder is related to weaker currencies, and that CapEx is below depreciation. ROIC improved by 110 basis points to 8.9%, driven by the lower capital employed. Per region, the picture differs, with earnings improvements also contributing to a higher ROIC in Western Europe and Asia. Excluding the impact from last year’s impairment, the ROIC improvement would have been 50 basis points. Slide 15 please. And here are some comments on the 2016 outlook. As already mentioned, the key focus for the year is executing Funding the Journey implementing SAIL'22 improved margin in Western Europe grow in Asia and then mitigate the impact from external factors in Eastern Europe. By end June, we are well on track for all of these. And based on the first half year performance, we maintain the outlook for the year of a low single-digit percentage growth in operating profit. As we delivered 8% in the first half, this implies less organic growth in second half. This is as expected in first half we were cycling easy comparables in Western Europe and also in Eastern Europe due to last year's poor weather conditions in Northern Europe and the destocking in Russia which predominantly impacted the first six months. To add a little extra caller on the beginning of Q3, we have seen good performance in Eastern Europe due to very warm weather while Western Europe has been soft which seems to be caused by the fact that there were still some stocks in the system following the euro-related sell-in, in June. For second half as a whole we also expect to start investing in SAIL at 22 initiatives. Financial leverage reduction was another part of our financial outlook and with the strong cash flow in the first half we are also well on track to deliver on that. With regard to assumptions underpinning the outlook which we have communicated in our February announcement there is an adjustment to the expected translation impact on operation profit. Previously we assumed a negative impact of around DKK500 million, but based on spot rates on Monday, including a euro and ruble rate of RUB72, the impact is now assumes to be around 600 million negative. Finally, we now expect the effective tax rate for the year to be around 33% compared to the previously expected level of 28%. As mentioned the increase mainly relates to one-off tax expense spend going forward we've seen effective tax rate of just below 30%. And now Cees 't will go through the details. Cees 't? Cees 't Hart: Thank you, Heine. Please turn to Slide 17, on Western Europe. We estimate that the overall beer market in our Western European region grew by around 2% for the six months. Our regional market share declined mainly due to the through the reduction of margin elative volumes in UK, Finland and Poland. Net revenue grew organically by 2% as a very solid 3% price mix more than offset a 1% organic volume decline. The positive price mix was largely driven by our new value management approach which implies a greater focus on profitability by brand, SKU and channel as on promotional activity profitability. Adjusting for the margin dilutive volumes, volumes would have grown by an estimated 3%. In spite of the significant step up in marketing investments of which a large proportion was related to the EURO 2016 Championship organic operating profit grew by 9% and operating margin improved by 70 basis points. This improvement was, to a large extent, driven by the actions related to Funding the Journey, as these supported both price mix as well as kept costs under control. In addition we had easy comps due to the bad weather in Northern Europe and early summer of last year. Slide 18 please, and a look at some of our key businesses in Western Europe. Our Nordic business performed strongly compared to last year. Markets grew by approximately 3% to 4% and we delivered growth in Norway, Denmark and Sweden. Volumes declined in Finland, as a result of last year's withdrawal from a supply contract. Price mix showed significant improvement due to closing cost and specialty, value management efforts and less low priced volumes. All four markets delivered profit growth with this particular strong result in Finland. Our shipped volumes in France grew by 3% in line with the market. The growth was mainly driven by our premium brands such as Carlsberg, Tourtel, Skol, and Grimbergen. The EURO 2016 was well executed by our team and supported gross of our premium brands as well as market share gains in the on trade channel. The competitive pressure in the off trade channel intensified and we lost share in the channel. The polish market remains very competitive. We delivered flat underlying volumes if adjusted for the withdrawal from a substantial margin diluted customer contract. In UK, we see good initial signs from our value strategy. Price mix grew by double digit percentages, reason by our intensified focus on brand development innovations and recently launched products and the craft in specialty category. Restructuring of the business is proceeding according to plan and in June we announced the intension to exit the porterage business, as well as outsourcing the secondary logistic businesses. Most other markets in the region delivered very solid performance with market share growth GPaL improvement and growth in operating profit, with the most pronounced contributions coming from Italy, Greece, Bulgaria, and Germany. And now, Slide 19, please and to Eastern Europe. The Eastern European market -- beer markets remain under pressure because of the ongoing macroeconomic challenges. Our volumes were flat for the half year, reflecting a deterioration in Q2 due to more difficult comparables as last year's de-stocking among wholesalers and distributors in Russia was less pronounced in Q2 compared to Q1. Price mix was solid at 8%. As expected there was a notable slowdown in price mix in Q2. In Q1, we had very easy comparables whereas in Q2 we are lapping last year's many price increases. This year price increases in the region have been less pronounced than in 2015. Organic operating profit grew strongly by 90% and operating profit margin increased by 100 basis points. The earnings growth was driven by a number of factors including easy comparables and Funding the Journey benefits as price mix improvements and despite cost control. Slide 20, and a few comments on Russia and Ukraine. The macro environment and consumer sentiment in Russia continued to be very challenging and we estimated that it would be a market to declines by about 2% for the six months. Our volumes declined by 2% as we were cycling the easy comparables due to last year's de-stocking. Our market share reached 34.8%, this was a solid sequential improvement when comparing with a second half of last year, but a decline year-on-year. We saw good performance of brands such as Carlsberg and Baltika 0 and 9 while Tuborg and Baltika 3 declined. We increased prices across the portfolio in H1 by 5%. It's an significant variation between brands. We applied this selective approach to achieve a clearer distinction between categories and brands, for instant we reduce the price point of the Carlsberg brand to make is more affordable international proposition for consumers. With this we entered the summer season is a more competitive portfolio offering in the last year. For the remainder of 2016, we expect the Russian market to remain difficult due to the macro economy and the implementation of the alcohol register system EGAIS, which we believe will have some negative impact on the traditional trade retail universe in the second half of the year. Finally, although the ban PET of more than one half liter does not come into effect until January 01, 2017, we will stop the sale of the above one half liter PET already in Q4. In Ukraine, the market decline continues as economy remains in a deep recession, we estimate that the decline was around 6%. We gained market share as a result of strong performance of our local power brand Lvivske, along with Carlsberg, which was also supported by the EURO 2016 activation and finally the very successful launch of the Garage brand. Please move to Slide 21, where you see that our Asian business continues its positive performance. Regional volumes were impacted by a combination of the market development and brewery closures in China, declining organically by 2%. Adjusting for the closers, volumes would have declined by an estimated 1%. In spite of the volume decline, net revenue grew organically by 4% driven by a very solid price mix of 7%. The price mix was achieved through our ongoing premiumisation efforts on our local brands, continued push behind our international premium brands among which Tuborg in particular continues to grow rapidly and the finally the reduction of low price volumes in Eastern China. Likewise the earnings growth continues. Operating profit grew by 6% organically and operating margins improved by 60 basis points. Again, Funding the Journey benefits are coming through. And the business deliver price mix improvement gets cost under control and executed brewery closers. In addition our business in India has sighted to deliver meaningful profits. Slide 22 and a few market specific highlights. The Chinese market declined by an estimated 6% in volume terms, as it was impacted by the soft economic, social economic changes and by extra renowned efforts and bad weather. We’ve accelerated the network optimization program, resulting in the closure of eleven sites with a few more still under evaluation, the sales to incomplete sites, and considerable fix cost savings. Our Chinese volumes declined by 8% impacted by the general market decline as well as the brewery closers in the eastern provinces. We gained market share in most of our four provinces and in the premium segment. This is offset by lower economy brand sales in non-core provinces, where we have also closed unprofitable breweries. We remain optimistic on the value opportunities as mix premiumisation continues fast, particularly as a growing middle class fast trading up into international premium brands. These now deliver long terms of our China revenues led by Tuborg that is now a clear number two international premium brand, while in twice the size of the next competitor. Super premium specialty sales also increased at over 50%, led by 66 Blanc. The cost reductions and premium growth led to a strong equal margin improvement that we released we can continue. In India volume growth continued and delivered a growth of 17% in spite of the alcohol ban in the Bihar state as of April. Our volume share in India is now it on 16%. Profit improved significantly, driven by volume growth and mid single-digit price mix. Tuborg continues to deliver strong growth rates, and Carlsberg Elephant also showed a very strong performance for the first six also showed a very strong performance for the first six months. Tuborg was launched in Vietnam in April; and the initial signs are very positive and ahead of our initial expectations. The Vietnamese market grew by an estimated 8% and we gain the market share. Our volumes are impacted by de-stocking in December ahead of the Tet festive season, and in advance of the duty increase of January 01st. Volume development therefore improved quite essentially throughout the half year. In Laos, we saw good growth of our beer volumes, while the soft drinks and water business came under pressure, due to intensified competition. In June, more than 100 bilau rocket festival events were carried out across the country. That is all for today, but before opening up for Q&As a few concluding remarks on Slide 23. The group had a good start to the year. Funding the Journey is on track, SAIL'22 has been well received by our people, and the implementation is now ongoing across markets and functions, and H1 delivered positively towards our regional priorities for the year. In addition, SAIL'22 including some very specific financial priorities. Our delivery again this were also satisfactory with 8% organic growth in operating profit, ROIC improvement versus H1 last year, as well as full year 2015, and strong cash flow and reduced net interest bearing debt leading to a further decline in leverage. This satisfactory execution so far this year, we are able to maintain our organic operating profit expectations for 2016. And with this, we are now ready to take questions.

Thank you. [Operator Instructions] And our first question comes from the line of Michael Rasmussen from ABG. Please go ahead. Your line is now open.

Heine, welcome on board to you. So I would like to ask three questions, please. First, on working capital, well done on that one, how about going forward? What should we see here? I mean looking at inventories to sales it seems a little bit just like a normalization versus 2012, 2013, 2014. And also, in terms of payables, looking back over the past four to five years, you have been able to improve that line by about 1 percentage point to sales per year. Is this going to continue in the second half, and in to 2017, please? My second question, if you could just give us a little bit of support on how to model in the divestments in Malawi and South Vietnam i.e., how much will hit the special items line and the cash flow lines in second half, please? And finally, on the Russian market, you mentioned that you believed the market was down 2% in first half. You still guide, I believe, the 5% to 10% decline for the full year. Is second half really going to look that bad? And also, note that your competitor, Efes, was out yesterday saying that they now saw a low to mid single-digit decline in the Russian market. Thank you. Cees 't Hart: Michael, thank you very much. And for your first two questions, we are glad that we have Heine on board. Heine?

Yes. Good morning, Michael.

Sorry, Heine, I don’t think your microphone is switched on. Cees 't Hart: So it was a strong first half and going forward, we don’t see that continuing. Bear in mind that when we look at trade working capital there is a reclassification, so you have to see trade working capital together with other working capital. So the net impact, net improvement is around DKK800 million, strong first half. Going forward, we will continue the strong performance we have had historically, but broadly in line with previous years. In terms of Malawi and Vung Tau divestments, there will be a special item impact in the second half. It is not something we comment on specifically for good reason so there will be no numbers here. But there will be a positive impact from both of them in second half in terms of cash, there as well be a positive impact, and particularly from the Malawi divestment. Then also remember, in terms of leverage that Malawi also came with and also was a relatively profitable business.

This is Heine. With regard to your third question regarding Russia and we assume in our for H2 Russian market decline of mid single digit percentages for the full year and so basically more resource 5% to 6% of the decline and we see the consumers remain under pressure and then specially a guys was implemented and the force from the 1st of July and as a result we have seen a reduction of universe at some smaller outlets driven the installed the system and we see that we need to see the impact from the market on that and the other reason that we are maybe did different from others is that, to comply with the PET ban that comes into effect on January the 01st of 2017 we will stop production and the market probably will stop production already during H2 for the one half litre PET so this are the reasons that we are bit concerned or careful for the outlook for Russia for the second half.

Thank you. Our next question comes from the line of Soren Samsoe from Seb. Please go ahead. Your line is now open.

First, a question regarding Funding the Journey, which you say is on track. But could you maybe just explain to us the timing of the earnings still you expect to see from Funding the Journey before marketing investments, just so we know when we should expect the biggest delta from that? Cees 't Hart: So as I explain Funding the Journey, have three elements getting good data to making it available and then routinely monitoring it. We are now just moving to that third phase so that's why we're saying for 2016 we're expecting to deliver about a quarter of the net benefit you will recall the net benefit 2018 versus the baseline of 2015, 1.5 billion to 2 billion. We would expect an acceleration very much in 2017 as that a record routine monitoring comes in and then from 2018 the program should be completing the delivery, and then sustaining going forward.

So the largest effect will be in 2017? Is that correctly understood? Cees 't Hart: It builds up. So we're saying 1.5 billion to 2 billion in 2018 versus ’15 but saying about a quarter this year we would expect an acceleration the following year and then delivery full delivery in 2018.

Okay. And then, regarding China and the closure of different sites, you say you've now closed down 11. I think, I remember, you said eight after Q1, is that correct? So there's been three net closures in Q2? Cees 't Hart: Yes. So we closed 11 in the two years you are right three since Q1. We have also sold off which we haven’t talked about before two half completed sites and so they have gone so we are now nearing the end of the program and but we are still evaluating a couple of further sites.

Okay. And then, just a question regarding cost of goods sold. Will you see higher -- more headwind from that in second half than in first half? Is that one of the reasons why you think earnings growth will be lower in the second half? Cees 't Hart: That will be -- that is correct that will be a transaction impact in Russia in second half.

Okay. But nothing in Western Europe or Asia, particularly? Cees 't Hart: Not something -- the big part is the transaction impact in Russia.

Thank you. Our next question comes from the line of Simon Hales of Barclays. Please go ahead, your line is now open.

A few quick questions from me, if I can, first, just going back to Russia, you talked about the volume outlook for the second half. Where are we on pricing? Have you taken any further pricing as we've gone in to the Q3? What are your expectations there? Secondly, you talked about a slower start in Western Europe to Q3, given some de-stocking, post the European Championships. Are you able to provide a bit more detail as to markets where you're seeing that, and perhaps some idea of the scale of that de-stocking? And then thirdly, obviously, the SKU rationalization looks to be well on track, if not ahead of plan. The pain SKU rationalization that you've talked about incrementally, I assume that is all incremental to what you'd initially identified in the 1.5 billion to 2 billion of savings you expect from Funding the Journey. How quickly should we expect some of those pain SKUs to be able to be taken out of the business? And then just finally, just as a point of clarification on the tax issue, is it right, as I understand it, that there is no incremental cash impact from the loss of the Finnish tax ruling, you're just having to expense that now in the P&L in the second half of the year? Cees 't Hart: With regard to Russian pricing, as you know I have seen the inflation went down and we want remain to be priced in a competitive way. So after 2015 where we raised the prices significantly almost around 15%, we have been a bit more careful in the first half year by 3% to 4% and we expect another 1% to 2% depending on the channels for the second half of the year. Regarding Europe de-stocking, frankly it's difficult to estimate after one month, so we need -- not to see how August moves further. But we have seen in the majority of the European countries that was a good focus, and rightly so on delivering in Q2 and making sure that the stock was in the trade for potential uplift. We have seen uplift as you have seen that in our figures for Q2. But there probably is some de-stock or some stock still in the trade. And after we have seen and finalized August, we probably know better how much that has been. With regard to SKUs, Chris?

Yes, on SKU rationalization, so you should really see these as two rather different programs. One is about cutting a tail of low value SKUs that’s why we have already made good progress and they are still further SKUs to come out as we have explained before, we are doing that sequentially. So we can maintain the shelf space and in some cases replace SKUs. The pain program is a little bit different, it's less about quantity, it's more about taking out maybe a relatively small number of SKUs but SKUs which are quite disrupted to the supply chain it can be particular liquids, particular bottle shapes and it’s little bit site specific. We developed a tool and which is not rolled out, whereby we assess the pain factor of each SKU. And those SKU which have a high pain factor, we then either take them out or we address the pain underneath them. And that's work which has now started. We piloted it in two markets, the tool is now expanded across the company and I think that’s going to take 12 to 24 to we get to the end of the program. Cees 't Hart: And the comment on and answer on the question regarding tax case related to 2006 to 2007 the tax was fully paid in 2010 but we appealed the decision by the Finnish tax authorities to the court system, and then we lost, actually, in the Supreme Court decision in May this year. That’s why we now expensed everything but you're absolutely right in assuming that there will be no significant tax impact, sorry cash impact this year, because the tax was paid in 2010.

Thank you. Our next question comes from the line of Jonas Guldborg from Carnegie. Please go ahead. Your line is open.

First, a couple of OCM-related questions; and then, a networking capital, first, you note in the report that you don't see the same substantial savings against targets on OCM in Western Europe as you do in Eastern Europe and Asia. Is there any color you can put on that, please? And then, you also say that the OCM savings are well ahead of targets. Does this mean that initial targets are going to be raised or just that you will reach them quicker than expected? And then finally, on the net working capital, can you say how much of the DKK550 million negative development in other working capital that is explained by these pension obligations? Thank you. Cees 't Hart: Jonas OCM, remember that we started this program in Asia last year, so almost three steps I mentioned before about good data readily available, routinely monitored. Asia has been at it of eight to 12 months longer than Western Europe. So I think Western Europe is where we would expect it to be at this point in time; it's similar to where Asia was at similar point in time. So as I explain to the earlier question it’s ramping up now and getting this routine monitoring in place does require some focus and efforts. I think there is no reason to leave it all that the goods won’t come. In terms of the OCM savings, I mean OCM is just one part of funding the journey and it’s really a support element that delivered primarily against OpEx but it is also impact cost of goods. And we have this 15 cost groups and our target was set on the assumptions, it would take time for the program to ramp-up, but the fact we’re delivering a quarter is a bit more than we had expected. And because we’re getting traction behind it and what we reach quicker than expected as a, because it is part of the total program, I think you should stick to the assumptions of 1.5 billion to 2 billion net benefit in ’18 versus ’15 with the ramp I mentioned earlier the quarter this year acceleration next year and then full delivery in 2018.

In terms of the net working capital question and the minus DKK555 million, remember, in here is the reclassification to trade working capital, and also a pension contribution, cash contribution and the pension cash contribution is around DKK250 million.

Thank you. Our next question comes from the line of Hans Gregersen from Nordea. Please go ahead. Your line is now open.

In the initial presentation, Chris, there were some comments on the big cities and craft and specialty driver. Can you shed a little bit more light on where we are, and what you see coming from this? Question number two India, you mentioned meaningful profits, what does that mean? And the brewery closure you have done, what will that do to the business? And then finally, the Malawi divestment, when do you expect to get the cash from that? Thank you. Sorry, and then finally, why do you expect such a continued very high level in unallocated cost? What’s driving that in the second half? Thank you. Cees 't Hart: With regard to the announced elements of SAIL'22, we are now in preparing ourselves with finding the right people to be on top of the program. We just announced our previous CEO of Sweden to be the head of big cities he’s forming a team, as we speak and he’s going to develop the program and by the end of this year, we will have a discussion in ExCom how we’re going to start and implement roll out the big cities strategy in 2017. So we are focused very much on first of all delivering Funding the Journey and whilst we are doing that, preparing ourselves for the strategic thrusts, making sure that we have the right people in the right place and again as we speak this being done. Now, we move forwards for implementing our program to start with the program, or the budget 2017.

But when do you expect to be able to communicate more clearly on it? Cees 't Hart: I think after, obviously, when we talk about, for example, big cities, we don’t want to announce which are the big cities we are going to, well, to conquer maybe is a big word, but at least to enter. So at the moment that we have landed in the big city we will, for sure, update the market.

On India, recall that this was a Greenfield entry going back to 2008, and as you would expect in a Greenfield entry, up until now, until last year it was very much investment mode. Last year, as we motioned to you, we got to breakeven, which actually was ahead of the plan we’d put in place a couple of years before. And this year, when we talk about meaningful profit it is still single-digit margin and but it’s starting to be attractive. And you mentioned Bihar. Bihar was 7% to 8% of our Indian volume, it’s now disappeared. And it was actually one of our more profitable states and despite that our profitability is still quite satisfactory and ahead of where we’d expected a couple of years ago.

And on the question regarding Malawi, very pleased to confirm that we have received the money in August. So that’s very good. In terms of your question Hans on second half unallocated, it is right that we have said that unallocated costs for second half is going to be broadly in line with last year subject to SAIL'22 investment and that is really why it's going to be at that level in second half. It is because of the investments into SAIL'22 initiatives with the cost on them made to ensure the long-term profitability of the company.

But, if I understand your answer correctly, does that mean all SAIL'22-related expenses will be booked as unallocated costs?

No, it definitely doesn’t but it does mean that some of the initiatives on the SAIL'22 starts with us and making plans and doing investigations and analysis and these analyses are done at group level. So the initial part will be heavy towards the corporate costs.

Thank you. Our next question comes from the line of Richard Withagen from Kepler Cheuvreux. Please go ahead. Your line is now open.

Just three questions, first of all, on the organizational changes, the changes in the ways of working within Carlsberg, and, I guess, a more centralized structure, Cees, perhaps you can say a bit or talk a bit about how that has been picked up by the organization in the past year, and whether you still see some room for improvement in execution. Second question is on the golden triangle. You said that there you may have to do some adjustments to reduce your market share losses. If you can give some more background on that as well. And the last question I have is can you tell us how much your marketing to revenues were up in the first half of the year compared to last year? Cees 't Hart: With regard to the organizational changes we basically started off after Q3 you are seeing quite some changes in the cost structure and as we go forward we discuss with people and our top 60 how we move forward and of course at the moment that they feel really on board we continue and if at the moment if they feel that they cannot contribute that much to our changes we might make a change. We have changed more or less 15% of our top 60 now but frankly overtime that they will become a natural process of people that come in and go out of the business. The program as such has picked up very well, especially the golden triangle, where you were alluding towards but as well the changes as such that we focus much more on implementations of plans getting the savings already, getting the savings to the bottom-line we see very good attraction of Funding the Journey we see a lot of a progress on the preparations of SAIL'22 so all in all looking a backdrop of last year I think the changes we have implemented we have a very good traction and in that respect I'm really satisfied. As well with how the new team comes together we focus very much on the performance management and have good review monthly review sessions on how the business performs that's different from the past and that serves as well. With regard to the golden triangle, we have implemented the golden triangle and then our business to strike the right balance between the three metrics and then you implement such a significant change from previous as you know it was more focus on market share when you implement such a significant change there will be businesses that adopt it very fast and successfully while other businesses need a little longer and more guidance to strive the right balance and that’s what I meant in my remark.

And on your question regarding marketing investments relative to revenue on a reported basis marketing investments in first half are up 3% to 4% and the main reason here has do with the EURO 2016 investment.

Thank you. Our next question comes from the line of Tristan Van Strien from Deutsche Bank. Please go ahead. Your line is now open.

Three questions, if I may? The first one, just for clarification, the step up in sales and marketing in Western Europe, is that in addition to the 150 million, or so you have now allocated -- or in the unallocated bucket essentially for Europe? The second question, in Russia just a bit of color on your pricing ladder, now that you have reduced the price of Carlsberg, what is the weighted average market price of Carlsberg relative to the market, and where was it one year ago, and where does it sit now relative to Tuborg, where it was one year ago? And then the third question, just on Malawi, does the sale include your Southern Bottlers coke franchise? And is there a change in control clause there from coke that Castel has to deal with? And if it does, if they do, do a change of control, does Castel have any recourse back to you guys if they lose the coke franchise? Thank you. Cees 't Hart: Thank you very much. Heine?

Basically on the sales marketing investment in Western Europe and the reason why that’s goes up that primarily has to do with the investments in EURO 2016 as well.

Does the clarification -- so that margin in Western Europe, that includes the additional cost of EURO 2016, which is an addition to the unallocated bucket?

It is. That is correct.

Okay, thank you. Cees 't Hart: With regarding Russia, the Carlsberg price point was lowered in the beginning of the year by 35% to 40%, as we said we are having a new commercial program for 2016, which while the summer is going on though, the season is going on as we speak. So we need to see what the consequences are. But we have indeed decrease the price of Carlsberg, we are focusing much more on key accounts, we having a better mix of national and regional brands and we focus more on deals. So that’s -- these are the four pillars of our commercial plans for this year. Again, Carlsberg price point was lowered, the Carlsberg brand has had an insignificant share in Russia, our other international premium brands like Tuborg and Holsten, are much more important. It was done down to reposition Carlsberg as an affordable international proposition. And as consumers are under pressure they are looking for more affordable alternatives. And what we can mention now is that the first signs of this reduction of the new pricing is really successful but it's early the early days in the season. But the first half of the season this has been successful.

And I think just -- sorry.

Just a quick -- just a follow-up on that case. Is Carlsberg now positioned then below Tuborg at the moment in the market?

It is. Yes.

Okay, thank you. Cees 't Hart: And on Malawi, you asked about the coke franchise, we sold the business as his and it's now Castle’s responsibility to manage coke in, with coke in whatever way they feel best.

So if they take away the franchise, like Morocco years ago, there's no recourse to you guys? Cees 't Hart: That is correct, yes.

Thank you. Our next question comes from the line of Trevor Stirling from Bernstein. Please go ahead. Your line is now open. Hello Trevor are you on mute? Okay so then we will go to the next question of Olivier Nicolai from Morgan Stanley. Please go ahead. Your line is now open.

I've got two additional questions, please. First of all, in the Western Europe you have lost share in a few key markets. Are you expecting just to realize your market share in H2; I'm thinking about Poland, France, and the UK? And more specifically, the UK excluding the Tesco impact, are you able to say if you maintain share in the existing channels where your products are sold? And just one last question on Vietnam, you sold a brewery to Heineken in July, could you give us an update on your strategy in Vietnam going forward? Is it just to focus on the north of the country? Thank you very much Cees 't Hart: With regard to the share, obviously, we try to balance the share loss. As some of that we will not be able to re-corporate the second half of the year, just because of the factor that we lost a contract in UK and we finished our sales in Poland and Finland a contract which was loss-making, and a consequence of that you’re seeing in the improvement of the margins. So in that respect our share probably will be still bit under pressure in the second half of the year. With regard to France, that’s different issue, we have focused very much on the preparation of the EURO event and we have been there very successful in the on-trade during the event although the number of visitors of [indiscernible] was lower than we expected. And the terrorist threats and the very almost brutal weather during especially at the beginning has played its role but the share in on-trade has developed very positively. And we were focusing on if you like normal promotions in the off-trade channel where some of our competitors went in visible loss, that has surprised us this kind of very steep price reductions and by that we’ve have lost some share in the off-trade which obviously we want to gain back. After three years of gaining share in France, there is bit of a setback in the especially at off-trades and obviously we want to correct that. And with regards to Vietnam, indeed, we focus on the territory where we are. We have a footprint, which we would like to improve at the moment that the privatization is being implemented as you know the Habeco, is something we talked about it earlier and we’re very satisfied with launch of Tuborg, that’s really a successes, we’re gaining share there. And we have high expectations for the second half of the year on Vietnam to prolong the success of Tuborg.

Thank you. The next question comes from Andrew Holland from Societe Generale. Please go ahead. Your line is now open.

Two questions, if I may. Firstly, on your SKU reduction, I think we've talked before about how that was a target of previous management and didn’t seem to make much progress. Can you just remind us what you think your total number of SKUs is? If you’re targeting short 2,900 to get rid of, that sounds like a very ambitious program, so how many have you got? And when you talk about that, is that a net or a gross number, because presumably you’re introducing new products? And which regions are most of those SKUs coming out of? That’s question one. That’s about five question ones. The second question was on the Russia retail, these new regulations for retailers. Can you give an idea of how, what proportion of your business in Russia is likely to disappear as a result of those retailers not being able to comply with the new regulations?

So on SKUs, we started off with just under 10,000. So it is a substantial number. The number we’re giving you is a gross number, so like any good business we are doing innovations, but we’re trying to hold and successfully holding the number we are introducing to about half of what we’re taking out. And in terms of regions, we’re seeing progress across all of the regions. And in terms of sustainability, it really does come back to what I mentioned before, we have a monthly scorecard of SKUs planned to take out. We have a monthly report on how many SKUs did come out, how many new SKUs went in, and then we keep a tracking total. So it really comes back to that philosophy of having the data and routinely monitoring it, to prevent the creep coming back in. Cees 't Hart: With regard to Russia, thank you, Andrew, for the question, basically we had a few big trends going on with Russia as you know. The modern trade is coming up it’s close to 40% of the total market. On-trade is 10% that means that traditional trade still 50% of the market, but declining. We think that EAGIS could reduce the number of very small outlets, outlets that need to incur a cost to introduce the system of EAGIS. It has not been enforced until July 1st, so we now need to see what the impact is. A specific answer on your question, I think that 5% to 10% of the distribution is in area of very small. That doesn’t mean that, that will disappear. But these are, if you like, the mom-and-pop shops that some of them might conclude that they don’t want to invest in the EAGIS system. So that’s, if you like the kind of, a part of the distribution that, at a certain moment, might be under pressure, not meaning, or not indicating that it will disappear at all. But part of that could disappear.

Thank you. Our final question comes from the line of Carl Walton from UBS. Please go ahead. Your line is now open.

Just a couple of very small follow ups, one, on the Russia pricing you’ve taken, is the competitive dynamic sort of normal, in the sense that competitors are following maybe with some small normal amount of lag? Or is there more aggressive moves from competitors on pricing in Russia? And then, the last one, just on the tax rate, you did say that, obviously, excluding the Finnish one-off expense the underlying is moving to just below 30%, which, so ignoring the Finnish expense, is a little bit higher than the circa 28% guidance we'd seen before. Is there anything significant to flag in that? Is it just generally rising rates, or geographic mix or anything significant to flag there on the underlying tax rate? Thank you. Cees 't Hart: With regard to the private resident in Russia we can say that the competition has increased the prices as well so that is different than we have seen in 2015. With regards to the tax Heine?

On the tax part you are right we think now just below 30% and that is not a 28% so it is a little bit higher than what we have said in the past and pace against with the distribution of our profits including also Russia with a relatively with a lower profitability and also some efficiencies we have in our tax structure in some emerging markets in particular in China. So, you are right just below 30 it is not 28% and the main reason has to do with the distribution of profits across legal jurisdictions. Cees 't Hart: Thank you, and that was the final question. Thanks 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. Bye-bye.