Heineken’s first half profits fall
You did not want to be in his shoes. At the end of August Heineken’s CEO van Boxmeer had to report a fall in 2007 first half earnings, reflecting a hefty fine levied against the Dutch brewer by the European Union for price fixing.
Heineken’s net profit for the first six months of 2007 was EUR 302 million (USD 413 million), down 30 percent from EUR 433 million a year ago. The brewer said that net profit would have been up by more than 30 percent had it not been for the fine of EUR 219 million (USD 299 million) that the European Union slapped on Heineken this spring for price fixing practices during the late 1990s. Of course, Heineken denies that it was involved in price fixing. Appeals are likely to last until 2010, van Boxmeer said, and in the meanwhile he doubted any civil suits would be successful.
During the first half sales rose 6.8 percent to EUR 6.13 billion (USD 8.37 billion) from EUR 5.74 billion in the same period of 2006.
Heineken reiterated its forecast for 20 percent growth in earnings for 2007, before exceptional items such as the fine.
Heineken said its sales increase was driven by strong volumes, an improved sales mix and higher pricing. Growth in Eastern Europe and Africa, but also exceptionally mild weather, winter weather, in most parts of Europe helped to drive up sales.
The brewer was not the only one to register rising energy, grain and packaging costs. These will have added 8 percent to Heineken’s raw materials costs in 2007, the company said. But Chief Executive Officer Jean-Francois van Boxmeer said that the company had successfully passed those increases on to the market.
The company showed operating profit increases in all areas, with its most profitable Western European operations up 12 percent to EUR 332 million in EBIT (USD 454 million) on a 1 percent volume increase, due in part to cost savings.
In Central and Eastern Europe, already Heineken’s largest market by volume, volume growth was 12 percent and operating profit rose 34 percent to EUR 207 million (USD 283 million).
In the Americas, where Heineken has introduced a Heineken Light into the U.S. market in the past year, operating profit was up 5 percent to EUR 134 million (USD 183 million), with volumes up 4.3 percent.
Interestingly, van Boxmeer admitted that Heineken would not meet its target for the new light beer in the U.S. this year, but insisted the introduction was "going the right way".
In Africa, operating profit was up 34 percent to EUR 154 million euros (USD 210 million), passing the Americas in terms of importance to Heineken’s bottom line.
In Asia, profits rose 11 percent to EUR 52 million (USD 71 million).
Heineken N.V. changed its dividend policy at the beginning of the year, increasing the dividend payout ratio to 30 percent to 35 percent of net profit versus the previous range of 20 percent to 25 percent. The interim dividend is now fixed at 40 percent of the total dividend of the previous year. Accordingly, an interim dividend of EUR 0.24 per share of EUR 1.60 nominal value will be paid on 20 September 2007.
