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Heineken Tempers Profit Hopes As Americas Slip

Published on Oct 25 2019 10:30 AM in Drinks tagged: Trending Posts / Heineken

Heineken Tempers Profit Hopes As Americas Slip

Heineken has forecast that profit this year will be at the bottom end of its previous guidance after an unexpected dip in third-quarter sales in the Americas partly offset strong growth in Asia.

The Dutch maker of Heineken, Europe's top-selling lager, as well as Tiger, Sol and Strongbow cider, said that operating profit before one-offs will rise by approximately 4% on a like-for-like basis in 2019.

It had previously forecast mid-single-digit percentage growth, although market expectations had shifted to the bottom of that range after operating profit barely grew in the first half of the year.

Heineken CEO Jean-Francois van Boxmeer also warned of increasing volatility across a number of markets and said that this is likely to continue for the rest of the year.

Analysts said that the new guidance was behind the weakness, even if expectations had declined at the half-year mark, with markets on edge for negative news.

Otherwise, the Amsterdam-based brewer reported a mixed bag of beer sales figures, with a stand-out performance from its Asian business, better than expected sales in Europe, only weak growth in Africa and an unexpected decline in the Americas.

Overall, consolidated beer volumes rose by 2.3% year-on-year in the third quarter, exactly in line with expectations in a company-compiled poll.

Mixed Fortunes

The Asia-Pacific region was the clear outperformer, with a 13.9% increase. Vietnam, Heineken's second most profitable market, was strong as the company pushed deeper into the country. Cambodia was even stronger.

By contrast, beer sales in the Americas unexpectedly fell, by 0.5%. There was a sharp decline in the United States, where its Mexican lager Tecate slid further.

There was also a slight decline in Brazil, where Heineken became the second largest player in 2017 by buying the loss-making operations there of Japan's Kirin.

Heineken said that sales of cheaper beers there have declined after a price rise, while volumes of higher-priced beers such as Heineken, Amstel and Devassa grew by a double-digit percentage.

Economic growth has been erratic in Brazil, with a contraction in the first quarter. The country's central bank last month raised its growth forecast for 2019 to 0.9%, albeit with a high degree of uncertainty.

In Mexico, the company's largest market, sales were up by a low single-digit percentage, helped by the launch of low calorie Amstel Ultra. However, the company is now facing competition from rival AB InBev in the nationwide OXXO supermarkets where its brands were previously the only beers on sale.

Heineken's beer sales in Europe, where it is the market leader, grew by 1.6%, against expectations of a decline a year on from the soccer World Cup and drinking boosted by good weather.

Growth in Africa, the Middle East and Eastern Europe was also 1.6%, but below expectations with unrest in Ethiopia leaving volumes flat there.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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