Bloomberg News

Heineken Earnings Beat Estimates as Savings Combat Europe

February 13, 2013

Heineken NV, the world’s third- biggest brewer, reported full-year earnings that beat estimates as cost savings offset weaker beer shipments in western Europe.

Earnings before interest and tax, excluding some items, rose to 2.9 billion euros ($3.9 billion) from 2.7 billion euros a year earlier, the Amsterdam-based maker of Amstel and Strongbow cider said in a statement today. That exceeded the median estimate of 10 analysts for profit of 2.85 billion euros.

Heineken gained as much as 5.2 percent to the highest since at least 1989 in Amsterdam. The brewer cut 196 million euros of costs in 2012 through changes to the way it buys raw goods and services. Profitability will improve in 2013, the company said, as volume and revenue continue to advance, with African, Latin American and Asia Pacific markets offsetting weakness in Europe.

“Earnings growth is driven by emerging markets and the cost savings,” Richard Withagen, an analyst at SNS Securities, wrote in a note. “We expect this to continue in 2013.”

Today’s share price gain was the steepest since Sept. 19. The stock was up 3.7 percent at 53.88 euros as of 11:10 a.m.

Heineken said it expects 525 million euros of savings in 2012 through 2014, raising the target from 500 million euros. The increased goal reflects last year’s acquisition of full control of Asia Pacific Breweries Ltd. The company will book a further 100 million euros in charges to implement the program.

The price of goods to make its beer will show a “slight” increase this year, Heineken said.

Emerging Markets

Revenue last year rose 3.9 percent, excluding acquisitions and currency swings, the company said. That missed the 4.4 percent average estimate. So-called consolidated beer volume, excluding the effect of acquisitions, increased 2.4 percent, less than the 2.5 percent increase analysts anticipated.

Heineken is seeking growth in emerging markets to offset stumbling demand in western Europe, its biggest region. The brewer paid S$5.6 billion ($4.5 billion) last year for control of its joint venture in Asia Pacific to expand in countries including Vietnam and take advantage of faster sales growth.

Heineken, which this month announced a strategic review of its Finnish unit, said it will seek to increase sales of higher- priced beers across western Europe despite it being affected by “economic uncertainty” and government cost-cutting measures.

Beer volume in the region declined 2 percent in 2012 and revenue edged down 0.1 percent, led by Spain and its home market of the Netherlands. The French government increased taxes on beer in January, following an increase in levies on spirits in 2012. Heineken said it saw a 0.5 percentage point boost to volume in the fourth quarter as customers bought ahead of the tax increase. Estimating the effect of the increase on beer volumes in 2013 is difficult, the company said.

‘Unpredictable Environment’

“Europe is a very unpredictable environment for us to do business” as governments take action to address budget deficits, Chief Executive Officer Jean-Francois Van Boxmeer said today on a call with reporters. “It’s very difficult to predict in which direction it’ll go, but I’ll tell you one thing -- it doesn’t do good things for our business.”

Competitor SABMiller Plc has reported third-quarter beer volume that also fell short of estimates as “depressed” consumer confidence in markets including the Czech Republic and Poland stinted sales. Heineken said today that volume in Poland increased even as the country suffered low consumer confidence. Eastern European volume increased as sales in Russia and Romania helped offset a tough market in Greece.

Sales and profitability increased in the faster-growing markets of the Americas, Asia-Pacific and Africa and the Middle East, Heineken said.

James Bond

Full-year revenue rose 7.4 percent to 18.4 billion euros. The brewer increased the volume of its Heineken brand beer sales by 5.3 percent, benefiting from a promotional partnership in 2012 with the James Bond movie franchise.

Heineken said that an appreciation of the Nigerian naira, British pound and Mexican peso helped increase earnings by 63 million euros in 2012. Van Boxmeer doesn’t expect “big changes” in the euro, he said. The company has 81 percent of its U.S. dollar needs hedged at $1.31 to the euro for 2013.

Net income before exceptional items and amortization, excluding the effect of acquisitions and currency swings, was 1.7 billion euros. The company said in August 2012 it anticipated profit on that basis “broadly in line” with the 1.58 billion euros reported last year.

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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