Heineken reports a 74 percent drop in net profits
Net profit for the full year was EUR 209 million, down from EUR 807 million in 2007. Sales rose 27 percent to EUR 14.3 billion, boosted by the company’s EUR 10.2 billion acquisition of Scottish & Newcastle in May, which made Heineken the largest brewer in Britain.
Sometimes you have to pity those poor analysts who have to make head and tail of non-standard measures like Heineken’s. Chief Executive Jean-Francois van Boxmeer said that "organic growth" in 2008 – a non-standard measure that strips out the effects of acquisitions – in sales and operating profits would have been 7.4 percent and flat, respectively. He said that was better than expected.
However, actual earnings were hurt by write-downs, higher costs to finance debt, and the performance of newly acquired operations. The company stated that the exceptional economic circumstances required it to reduce the value of goodwill in Russia, investment in India and pub portfolios in the UK. These non-cash exceptional charges, together with low profit contributions of new businesses and the related financing costs resulted in a substantially lower reported net profit. Over the past 18 months, Mr van Boxmeer said, Heineken had entered eleven new markets.
Heineken’s organic sales growth was 3.6 percent, with its Asian market outperforming with 12 percent increase. Yet, organic sales in Heineken’s key markets in the Americas and western Europe declined 2.5 percent and 1.6 percent, respectively. The UK, Europe’s number three beer market, had been hit particularly hard: the recession, two (unprecedented!) excise duty increases within a year and the ban on smoking were acting as a damper on on-trade sales.
Last year the UK on-trade sector was down 9.5 percent, Mr van Boxmeer reported.
Profit before exceptional items and amortisation of brands, the company’s preferred measure, was EUR 1.01 billion in the full year compared with a EUR 1.12 billion a year earlier.
Heineken said the group’s beer volume grew by 16 percent to 161.5 million hl in 2008.
The brewer declined to give guidance for 2009 and remains cautious on the development of beer consumption.
