Carlsberg A/S
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Carlsberg A/S
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Ladies and gentlemen, welcome to the Carlsberg Q1 2018 Trading Statement hosted by CEO, Cees 't Hart; and CFO, Heine Dalsgaard. [Operator Instructions] As a reminder, this call is being recorded. Speakers, please begin.
Good morning, everybody, and welcome to Carlsberg's Q1 2018 Conference Call. My name is Cees 't Hart; and I have with me CFO, Heine Dalsgaard; and Vice President of Investor Relations, Peter Kondrup. I will go through the highlights of the quarter, and Heine will talk you through the reasons and outlook.Please turn to Slide 2. Quarter 1 is traditionally a very small quarter for our business due to seasonality. Organic net revenue in the quarter grew by 2%, and this was driven by a 1% price/mix and 1% organic volume growth. Reported volumes are 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, but 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 and a few comments on our international premium brands for which we saw good growth. 1664 Blanc continued 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, but 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 had a very successful build, making Tuborg one of the largest beer brands in the country.Volumes on the Carlsberg brand were flat as strong growth in Asia and growth in Eastern Europe were offset by a volume decline in the U.K.Please turn to Slide 4 and 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 & speciality category continues as 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 runway 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 & speciality 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's interest has been -- 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 update on the big city study as our activity remains very commercially sensitive. The priority is a slow burner, and 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 & speciality, 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, and good morning, everybody. Please turn to Slide 5 and Western Europe. Net revenues 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 has an impact of minus 3%; and a negative currency impact, primarily related to non-euro-linked currencies, with the largest impact coming from the Swiss francs, Norwegian and Swedish krona and then the Polish zloty.We saw positive price/mix in most countries, but our export and license business historically [ read ] the numbers for the quarter due to lower export and license sales in the Middle East and growth of Tuborg brands in Turkey. Sales in the Middle East was impacted negatively by increase in 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 retail price/mix negatively. Adjusting for export and license, price/mix in Western Europe was close to plus 1%. Volumes were impacted negatively by the cold weather in many countries, which more than offset the earlier sell-in to Easter.Looking at a few selected markets. Our volumes in the Nordics grew by mid-single-digit percentages, supported by the relisting of 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 & speciality and alcohol-free beer.In Norway, the positive development continued, with particular solid performance of our speciality products, although the CSC 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 & speciality portfolio continue to develop positively, with strong growth of brands such as 1664 Blanc and Grimbergen. The mainstream category remains under pressure, and 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 6 and Asia. We had a strong start of the year in Asia. Net revenue grew organically by 16%, driven by a 12% volume growth and a plus 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 the later sell-in to the Chinese New Year, our Chinese volumes grew by 9% and net revenue by 16%. All 3 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 a 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 where 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 7 and Eastern Europe, please. Net revenue in Eastern Europe declined by 3% due to 6% volume decline and plus 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% to 5% for the quarter. We delivered flat market share sequentially of around 31%, but we saw a market share decline of approximately 2 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 saw -- we had a very strong start to the year, driven by market growth and solid market share performance.Please turn to Slide 8 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 percentage organic growth in operating profit. Based on the spot rate on April 30, 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 & speciality and alcohol-free brews. We are well on track to deliver top and bottom line growth for 2018. And finally, we maintain the outlook for the year. And with this, we are now ready to take your questions.
[Operator Instructions] And our first question comes from the line of Jonas Guldborg from Danske Bank.
Firstly, if you could add some additional comments on your market share losses in the U.K. and what degree is this a cause of concern? And maybe also including the -- how did the price/mix develop in Q1 in the U.K.? Then secondly, a comment -- 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? And then thirdly, if I look -- it sounds like from the comments on the festive seasons in Asian countries that we should look at Q3 -- oh, sorry, Q4 and Q1 in combination. And 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.
Okay, thank you very much. 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 the over-index in mainstream. And the second thing is that the Carlsberg brand continues to lose market share in the mainstream segment. We see Carlsberg exports doing better because of the new advertising. But Carlsberg Green, as it is called, has continued to lose some market share, and we will come, of course, with correcting measures. I don't have, at this moment of time, information about the price/mix. But we have -- but basically, I think that's too detailed for now. With regard to the market decline in Russia, it's -- in our estimation, it's 4% to 5% if you compare that with Q1 last year. Then mainly, if you correct for the PET downsizing, we think the market has been flattish. And we don't change our view of the Russian market, where have we said that we will be around 0 this year in terms of volume. In Asia, frankly, we can cut the market and the year every time in different pieces, of course, but we are very satisfied with the development of our Asian market. Obviously, we have -- and touch this a bit later, you have some of the trade loading in Q1 rather than in Q4. But if you combine it and if you look at China, India, if you look at our market share development, if you look at the different price/mix development, we are very satisfied about Asia.
Our next question comes from the line of Sanjeet Aujla from Crédit Suisse.
I just like to come back to Russia. Can you just discuss the pricing environment there? Actually, 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. 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. So obviously, we are monitoring that closely. And 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 stable our share -- stabilize our share development in Q1.
Got it. And just a follow-up on the -- can you just also discuss your market share performance in the premium segment in Russia? And just a 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 -- continues to improve in Russia. And in terms of the volumes, if you will not have the contract in Finland, the volumes will be flat in Nordics.
Our next question comes from the line of Søren Samsøe from SEB.
Firstly, a question regarding the strong growth that you mentioned you have in some of your scalable premium brands like Grimbergen and 1664 Blanc. Would you say that this is due to your -- I mean, is this a direct result of your SAIL'22 strategy? And in regards to that, would you say that you're 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 rollout in different countries, as we said 2 years ago, especially Grimbergen was doing very well, but only in 4, 5 countries. And as we discussed before, we have now moved to other countries with Grimbergen and as well the 1664 Blanc. And we see the success coming through, which is very encouraging.
Okay. And then I couldn't help noticing that you have moved up Asia as the division you report as the #2 division now, which I think is the first time I've seen that. What should we read into this? I mean, why do you chose to do that now?
Well, maybe not now. We talked earlier about this, that we always get a lot of questions about Russia and a lot of focus. But 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. So basically, it shows as well how fast Asia is growing and how well we are doing there.
Our next question comes from the line of Mitch Collett from Goldman Sachs.
At the full year stage, I think you weren't keen to commit within the 2% to 4% organic sales growth rate. This year...
We can't hear you, Mitch.
Apologies. Is that better?
Yes, that's better, Mitch.
Sorry. So at the full year stage, you weren't keen to commit to the 2% to 4% organic revenue growth aspiration in F '18. You started with the 2% against what was the harder -- one of your harder comps. Would you be willing to commit to 2% to 4% organic sales growth at this stage? And then, 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. And then I suppose, given that's your biggest brand, what is the offset for that Tuborg growth and why hasn't growth overall accelerated?
I'm not sure about your last part of the question. But the first 2, 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%. So we don't guide from 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 recall, 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 first question as well, so either you need to repeat that or we move to the next.
Yes, I just wondered, 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 is 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 need to -- it doesn't basically eat in, in other volumes from other brands.
Our next question comes from the line of Trevor Stirling from Bernstein.
Two questions on my side, please. The first one is China. So if you could talk a little bit more about China, Cees, and what the underlying trends in China are? Is it still fair to say volume is flattish, maybe slightly down, but a very strong price/mix? And the second one, I think I know the answer to this, but any update on Habeco?
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, and that's where we leave it for now. With regard to China, we see there 40% growth of our premium portfolio. The Chinese volumes in total grew by 9% and net revenue by 16%. So we seem to have a good momentum in that market as we speak. [30%] of the volumes -- of our volumes is in premium, that's 40% of our net sales. And our total portfolio -- international portfolio grew by, as said, 40%, [ although ] it's Carlsberg, 8%; Tuborg, 14%; and Blanc, 53%. So I hope that gives a bit of color to you.
Our next question comes from the line of Michael Rasmussen from ABG Sundal Collier.
I would like to follow up a little bit more on the Habeco question that was just asked, if possible. I do understand there's been some issues with the Habeco deal. Can you please elaborate a little bit about this? If this is it 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. And then 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?
Yes, 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 regard to the proposal on further limitation of the PET sizes, a few members of the Duma have proposed to further reduce the maximum size of PET bottles, as you read. There's not set any date for a 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 Saint Petersburg with [ SPF ] in early May. And there, of course, we will have talks with members of the government, and I might be even allowed to raise questions in the meeting with President Putin again. This case has start -- this case on PET has started already 8 or 9 years ago, so these kind of steps can take quite a while, but there's no further update for now.
Our next question comes from the line of Olivier Nicolai from Morgan Stanley.
Just a couple of questions on India, please. You had a 30% volumes growth in Q1. Which states were the main driver behind this volume 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.
Olivier, I got your first question, not your second. But let me first take your first question and then you might want to repeat your second one. When we talk about states, it's a bit mixed. But it has a lot to do with where the impact of the highway ban was the highest, but we have seen a recovery in almost all states, but 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. But we are, I think, on average, between the 75% and 80% with regard to the numerical distribution in Q1 2018 vis-à-vis 2017. So we are on our way back.
Perfect. And yes, 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, we -- in general, we don't see further announcement of regulations due to come up. But we see a tax issue in West Bengal, so that probably will be an increase in the excise.
Our next question comes from the line of Hans Gregersen from Nordea.
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 EB point of view, did better than you had forecasted? That's the first question. Second part is, if you look on Asia, you have for quite some time delivered very strong organic growth. And the point is, how much operating leverage can we see that driving into the margin over a 5-year horizon? That's the second question. Thirdly, how many new big cities, although not a part of the big city program, have you added into China? And then, finally, Cambodia, any new status on the turnaround progress?
Well, if we start, Hans, with the question on the outlook for the full year. So you are right that we are 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 are continuing the journey towards delivering in line with our full year guide. In terms of Asia, operating leverage, yes, you're right, that it does help on profitability to have higher volume growth and revenue growth, clearly, but it's not something we comment on specifically.
But Heine, could you -- sorry, Heine, could you then give a little bit further insight in a different way? Can you give, not in number terms, but then verbally, how much are you over-investing in the region to drive growth? And how long will you -- or will you continue to do that, let's say, for the next 3 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. But it's in line with our expectations, and it's in line with the SAIL'22. And 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, so basically, these are the big cities indeed in China, in Western China -- I'm sorry Eastern China. We talked about 10 cities there. And with regard to your question on Cambodia, we are working indeed on a turnaround plan, but we have not seen basically the evidence of success of that yet, but that's too early to say.
Our next question comes from the line of Richard Withagen from Kepler Cheuvreux.
I've got 2 questions. First of all, can you talk a bit about the dynamics of price/mix, I think, especially in the Nordics and France? Because 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. So does that mean that your price/mix in the Nordics and France is quite strong? And is that mainly mix? Or is there also an element of price in there? And then the second question is on Russia. Baltika announced some new initiatives with Burger King and Teremok. Is that part of a strategy that expand distribution or increased exposure to different channels in Russia? And 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. And if you take out the U.K. and Poland, we talk for Europe about a price/mix improvement of plus 1%. With regards to Baltika and Burger King, yes, obviously, we do want to be where the consumers consume or shop, and that means as well that we use these kind of channels. And it's very much on the Baltika 0. And the more Baltika 0 we sell, the better it is for our price/mix.
Our next question comes from the line of Edward Mundy from Jefferies.
Just 2 questions, please. You're keeping your Russian market guidance of sort of flattish for the year despite Q1 down 4% to 5%. Have you seen evidence the market has improved in Q2? And then 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, when we talk about Q2 in Russia, well, we had a good -- as far as our operator, but that's not so much the issue. Why we are confident is that, basically, we kept our share. We have a negative or a difficult comps versus Q1 2017. And the huge volume and share decline average has started in Q2, and it basically continues in Q3. So why we are confident to come back to more or less 0 is because we have a trust that we keep our market share, and we have other comps more difficult than in Q1. And then on Tuborg Turkey, well, we are leading there as a partner. You can imagine that we don't give specific details on that one.
Our next question comes from the line of Laurence Whyatt from Societe Generale.
Firstly, in Vietnam, following the investment from ThaiBev into Sabeco, I'm wondering 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 do you think that might have on the U.K. supermarket landscape. And 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 change in the competitive landscape there as a result of that one.
Okay, Laurence, thank you very much. I must admit that probably there are 3 times no change as an answer. So 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., well, the deal has been announced on Monday. Obviously, our teams are looking at it, but no answer on that one. And ABI-Efes, we have not seen any combined efforts in the market yet.
Just to confirm then, on Sabeco, you are expecting a management change following that type of investment?
Right. Because if you take over a company for that kind of money, you want to run it yourself, so yes, we expect that.
Our next question comes from the line of Eddy Hargreaves from Investec.
Apologies for moving straight down into your third division, but a couple of questions on Russia. One is, can you give us any sort of [ sphere ] as to your expectations around the World Cup phasing of sales profit marketing over Q2 and Q3? And 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? And then the sort of second question is regarding Poland. Apologies if I missed it, but 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, as you know, that will be mainly played in the Q2, so there will be the main activities and as well the costs. We are not the main sponsor, as you know. And we expect the main sponsor to activate the sponsorship, which may have a positive impact on their market share. But obviously, we have activations as well, so we are looking forward to the tournament. And the second question?
What's the capacity utilization?
Sorry, of course, yes. That's between 50% and 60%, so that has not changed significantly because we basically produce more volume, so more bottles run over the line. So in the brew house, we have a lower utilization, but on the lines, it's even slightly higher. And then I look at Peter for the third question because he is calculating that as we speak, and we talk about a 4% positive price/mix.
And 4% price/mix in Poland, and the volume performance?
We will come, after all that's been done, as we said, but we will come back to you later on that one.
Our next question comes from the line of Frans Hoyer from Jyske Bank.
This contract in Finland, was that a factor in the price/mix erosion in Western Europe? And if so, how much?
Yes, it has been, impacted our price/mix in Europe. Frankly, I don't know by how much now.
So a small effect. Okay.
A small effect, yes. And basically, if we move to that kind of detail, we don't want to disclose all these kind of things because of [the top line] as well about the complex.
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?
There's a lot. 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. And at the moment, if you're going to talk too much about the cities and success, then that will, of course, instigate competitive reactions. So that's the reason. In terms of CapEx, we've now 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.
So no changes to the same thing behind those efforts?
Yes, no.
Our next question comes from Andrea Pistacchi from Deutsche Bank.
Two questions, please. First one, on Russia. Now I realized Q1 is a small quarter. But why do you think the market hasn't really, really improved yet there, as the downsizing should now have -- should have played out by now? Second question, on Vietnam and new management there. Now besides the Tet timing, are you seeing an underlying improvement in the business there? And what is the new management doing differently?
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. So in that perspective, 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 an improvement basically in almost all the [leaders] on the business with regard to how to run a business operationally. So we have renewed some of the contracts with wholesalers and distributors. We are improving our distribution. We are moving to a better price segmentation and discipline in the market. So we see there a good impact of the new leader in Vietnam.
Can I -- sorry, can I -- just on Russia, so you're saying the PET, the downsizing is still having some sort of tail-end effect. It's not complete. In Q1, it wasn't completely in the base yet?
Yes, yes. The big changes in Q1 2017, as we're now [ orbiting ] against the Q1 last year, so there is some impact. In Q2, we expect that there was no any, let's say, impact of PET anymore. And obviously, that's the underlying development of the market.
The last question comes from the line of Simon Hales from Citi.
Can we just ask about your full year guidance? I appreciate that, obviously, the Q1 performance was in line with your expectations. But I wonder whether the mix of delivery in Q1 was different to what you expected 2 or 3 or 4 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 3 months ago?
Thank you, Simon. I think that's an excellent question for Heine.
Yes. So you're right, Q1, first of all, was in line with our expectations. Overall, it's clear when you look at the mix, there are some different elements into it. But overall, there are many moving parts in our profitability and in our mix and in our volume and in our revenue. So we do not comment specifically on the individual sort of elements of the full year guidance. So basically, full year guidance remains mid-single-digits growth in operating profits. A lot of moving parts, some pluses and some minuses. And it's basically our task to make sure then that negatives are balanced off against positives so that we -- whenever we see movements, and there is a lot of movements that we initiate, we kept closing plants, and that's what we do. So overall, confirming our full year guidance.
And 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.