HANOI: Heineken, the world’s third-largest brewer by market capitalisation behind Anheuser-Busch InBev and SABMiller, announced better-than-expected earnings on Monday for the first half, helped by robust growth of its Tiger brand in Vietnam and rising beer sales in Mexico and parts of Europe.
Africa was the group’s weak spot, as a devaluation of the Nigerian naira led to inflation of more than 9%, squeezing the brewer’s margins. It also performed less well in unstable Democratic Republic of Congo and Egypt, where tourism dropped off.
The Dutch brewer, whose Heineken lager is Europe’s top seller, increased profit on a like-for-like basis in all regions except Africa, although there was also a squeeze on US margins. It said it expected faster sales growth in the second half of the year but maintained its full-year forecast for revenue growth, which will be slower than last year.
Heineken shares surged by as much as 4.5% to a three-month high after the results, and were among the strongest performers in the FTSEurofirst 300 index of leading European stocks.
“It’s a positive mixed bag. Some margin pressure in Africa and Americas, but central and eastern and western Europe good against tough comparables,” said Trevor Stirling, beverage analyst at Bernstein Securities. He has an “outperform” rating on the stock, with potential for further emerging market gains relative to larger rivals AB InBev and SABMiller, whose emerging-market progress, he said, was largely priced in.
Those rivals are also more exposed to China’s slowing economy than Heineken, which is focused more on Southeast Asia.
Asia-Pacific was again Heineken’s fastest-growing market in the first half. It had a double-digit sales expansion in Vietnam, the region’s third-largest beer market, driven by demand for Tiger beer, which Heineken has been promoting harder since gaining full control of Asia Pacific Breweries in 2013.
With breweries from Mongolia to New Zealand, Asia-Pacific accounts for almost 20% of Heineken’s operating profit.
Heineken also enjoyed solid sales in Mexico, but had lower margins in the US owing to higher marketing costs as it promoted cider and other new products. In Europe, the Dutch group sold less beer, but still persuaded consumers to accept price hikes or shift to more expensive beer.
Higher profits in countries like Spain and Poland were offset by lower earnings in Britain and Greece. Overall, consolidated operating profit before one-off items rose 3.4% on a like-for-like basis to ¤1.55bn, above the average of ¤1.53bn in a Reuters poll.
Heineken maintained its forecast of revenue growth, with volumes rising at a slower pace than last year and weighted more to the second half. The company also targets annual improvements in operating margin of 40 basis points.
Bloomberg reported new products added ¤854m to first-half revenue, helped by Radler beers and The Sub, a home draught device. Such innovation helped volume grow in France, the Netherlands and Spain.
Higher pricing in Russia to limit the damage from the rouble’s devaluation and restarting business with a distributor in Poland, also boosted sales.
