Dutch brewing giant Heineken expects the COVID-19 pandemic to weigh on key Asian markets for the rest of the year and rising costs to dent margins, it has said after recording a better than expected doubling of first-half earnings.
Heineken Chief Executive Statements
Heineken chief executive Dolf van den Brink, who has been at the helm of the world's second largest brewer for a year, said that the company is pleased with the strong first half, but expressed caution, with results expected to remain below pre-pandemic levels in 2021 as a whole.
"Unlike last year, we now see significant impact on the business in southeast Asia," Van den Brink told Reuters in a telephone interview, referring to the fallout from the COVID-19 pandemic.
Get a FREE Digital Subscription!Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
He said that Vietnam, which is a top three market for Heineken, is a concern, with lockdowns imposed in its strongholds in cities and the south of the country. Elsewhere, the company's Malaysia brewery is shut and reduced tourism is hitting Indonesian sales.
The maker of Europe's top-selling lager Heineken, Tiger and Sol, previously forecast an improvement in market conditions in the second half of 2021, depending on vaccine rollouts.
Rising commodity costs, including for barley, sugar and aluminium for cans, will start affecting Heineken in the second half of 2021 and will have a "material effect" in 2022, when hedging contracts are no longer mitigating the increases.
Marketing expenses will also be skewed towards the second half as bars reopen.
More Beer Sold And Higher Prices
Heineken sold almost 10% more beer in the first half than a year ago and Van den Brink said that the company will seek to be "assertive" on pricing, having achieved nearly 10% higher prices per hectolitre of beer in the Americas and Africa/Middle East in the first half.
Bernstein Analyst Statements
Bernstein beverage analyst Trevor Stirling said that he is expecting consensus earnings estimates for this year to rise.
He said, "The inflationary environment will be much higher next year. How much can they recover in pricing?"
The company said that more than half of the savings under its three-year plan to save €2 billion and restore profit margins to pre-pandemic levels by 2023, partly through cutting 8,000 jobs, should be achieved by the end of 2021.
First-Half Operating Profit Figure
First-half operating profit before one-offs doubled to €1.63 billion, compared with the average forecast in a company-compiled poll of €1.22 billion.