DUTCH brewer Heineken reported a 12.5% rise in half-year operating profit to 1.5 billion euros for the first of the year but left analysts disappointed given key summer sporting events including Euro 2024 had been expected to boost its performance.
The world’s second-largest brewer saw net revenues increase 6% to 14.8bn euros in the six months to June, largely driven by growth of its largest operating companies in Nigeria, Mexico, Brazil, Vietnam, and India.
Heineken, which has about 2,400 pubs in the UK through its Star Pubs division, saw beer volumes for the half rose 2.1% year on year, with all regions contributing. Growth slowed in the second quarter, however, because of an earlier Easter and a wet weather conditions across Europe in June.
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The brewer now expects organic operating profit growth of between 4% and 8% in 2024, compared to its previous guidance of between low and high single-digit growth. It said this “reflects our confidence in delivery and commitment to invest behind growth and to future-proof our business”.
Chief executive Dolf van den Brink said: “We delivered a solid first half of the year, organically growing net revenue 6% and operating profit 12.5%.
“The Americas region stood out, as portfolio mix and major ongoing saving initiatives resulted in a strong operating profit improvement, notably in Brazil and Mexico. APAC (Asia Pacific) returned to growth, led by India and with the Vietnamese beer market stabilising.”
While alluding to “volatility” in Africa, Mr van den Brink hailed Heineken’s performance in Europe, noting: “We gained market share in the majority of our markets and beer volume was slightly up compared to last year despite poor weather in June.”
Heineken’s “EverGreen” strategy, which the brewing giant launched in February 2021 with the goal of futureproofing the business in the wake of the Covid-19 crisis, “continues to shape our business”, said Mr van den Brink.
Noting that premium beer volume grew 5%, led by the Heineken brand, which was up 9%, he also alluded to the fast-growing low and no-alcohol category, which saw Heineken 0.0 up 14%. “We are firmly on track to deliver 0.5bn euro gross savings for 2024, enabling us to invest in growing the category and in building strong brands.
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“In the second half, we will materially step-up investment in market and sales expenditures, with notable increases in key markets.”
The brewer pointed to the strength of its international brand portfolio, noting: “Amstel volume growth was driven by a very strong performance in Brazil where it further expanded its leadership position in the pure malt mainstream segment.
“Birra Moretti continued to grow in the UK driven by the launch of its line extension Sale di Mare, an unfiltered lager with a pinch of Italian sea salt. The brand achieved double-digit growth in 14 European markets, with notably strong results in Romania and Switzerland.”
At AJ Bell, investment analyst Dan Coatsworth was blunt in his take on the half-year results, stating: “There was nothing refreshing about Heineken’s results as half-year operating profit growth missed estimates and it stomached an 874 million euro impairment charge on a Chinese investment.
“That’s the second time this year the brewer has left the market with a sour taste, having previously disappointed in February with a downbeat tone.”
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Mr Coatsworth noted that while Heineken might have raised its operating profit guidance, “investors didn’t like the sound of spending plans” although he welcomed the brewer’s decision to ramp up investment in sales and marketing “to put its brand front of mind for beer drinkers”.
Heineken, he added, “benefits from having brand strength and that matters in a highly competitive market”. But he cautioned: “What’s still uncertain is consumers’ capacity to spend big on discretionary items while interest rates stay high. While lots of people might enjoy a beer or two, they may have no choice but to cut back on these little luxuries if they remain under financial pressure.”
Shares fell sharply in early trading yesterday.
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