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Heineken's Beer Boost Offset By Higher Aluminium Costs

Published on Aug 2 2019 10:00 AM in Drinks tagged: Trending Posts / Heineken

Heineken's Beer Boost Offset By Higher Aluminium Costs

Heineken NV has missed estimates for first-half profits as higher packaging costs offset increased beer sales, but the brewer has stuck with its full-year profit growth forecast.

The Dutch maker of Heineken, Europe's top-selling lager, said that operating profit before one-offs would rise by a mid-single-digit percentage in 2019 after a slim 0.3% increase in the January-June period.

The company said that it would benefit this year from increased sales, higher prices and a consumer shift to more expensive beers. But the company also warned that input and logistics costs would rise by a mid-single-digit percentage over the year.

Heineken's input costs in the January to June period rose 8.5%, principally for aluminium used in packaging.

Chief financial officer Laurence Debroux told Reuters in a telephone interview that the company's hedges on aluminium had been less favourable than last year's.

Heineken's emerging market operations had also been hit by having to pay hard currency for raw and packaging material with, for example, a weaker Brazilian real.

Costs also increased because of e-commerce investment and an IT upgrade and some sponsorship costs more skewed to the first half of the year.

"If you look at the first half, the month of June was more difficult, mainly because of weather in a number of countries, but the underlying trend of the business is on track ... and we're expecting that to move into the second half," Debroux said.

Sales And Operating Profit

For the first half, beer sales volumes rose in all regions, except Europe, where it was hit by poor weather and an unfavourable comparison to last year when the soccer World Cup boosted sales.

Operating profit grew by 0.3% on a like-for-like basis to €1.78 billion in the first half, missing analysts' estimate of €1.92 billion, according to IBES data from Refinitiv.

Sales were particularly strong in Vietnam, Heineken's second most profitable market, rising by a double-digit percentage as it pushes deeper into the country.

Sales in Mexico, the company's largest market, were up by a low single-digit percentage, and by a high single-digit percentage in Brazil, where Heineken is the second largest brewer.

"We knew the first half was going to be weaker than the second, but clearly the market hadn't realised the scale of the pressures in the first," said Trevor Stirling, beverage analyst at Bernstein Securities. "The business itself is in pretty good shape."

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

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