Heineken beats earnings expectations and rises 7 percent on the news
Isn’t it great, this short-termism? Makes comparisons less dramatic than they really are. Brewer Heineken is a case in point. Heineken, the world’s number three brewer, beat forecasts on 26 August when it reported a 20 percent jump in first-half net profit (ended 30 June 2009). How come? Aren’t we in the middle of a crisis? Yes, we are but Heineken made a one-off financial gain in its first half of 2009.
Cost-savings and price increases partly offset lower volumes. Organic beer volumes dropped 6.6 percent in the first half, most notably in central and eastern Europe and the Americas.
Heineken said it expects a higher second-half profit even as consumer demand for beer remains weak. The brewer expects the rate of decline to ease towards the end of 2009, as comparisons will be less demanding (!) given that volumes already declined sharply in the last months of 2008.
Heineken said it will focus on cutting costs and reducing debt in the second half of 2009 and that it will maintain the prices of its major brands. U.S. American consumers will be pleased to hear that as Molson Coors and AB-InBev have already announced a price hike for the autumn.
The Dutch brewer didn’t provide details on its cost-savings target but echoed similar announcements this month from AB-InBev, Carlsberg and SABMiller, which are also cutting costs to weather declining volumes.
Heineken said first-half net profit rose 20 percent to EUR 489 million from EUR 407 million in 2008, partly due to a one-off gain from the purchase of debt from Globe Pub Company, a U.K.-based pub operator.
While Heineken claimed that its once-ailing UK operations are "turning the corner", and that it sees signs of improvement as its S&N operations gained market share due to price increases and cost cuts, some commentators begged to differ: Scottish & Newcastle’s operations acquired last year remain a drag. In its first half of 2009 S&N made an operating loss close to EUR 36 million, it was reported, despite 80 percent of the EUR 184 million of identified cost savings having already been realised.
Call that “turning the corner”?
