Heineken: glass half empty
The Netherlands | Because of the global pandemic, Heineken saw a lot of declines in the first half of 2020: in beer sales, revenue and profit. So much so that it swung into a loss.
Heineken reported on 3 August that in the first six months of 2020 its beer volume dropped 11.5 percent. Its net revenue was down 19.2 percent to EUR 11.16 billion (USD 13.13 billion), as measured under international financial reporting standards (IRFS). Its preferred – read: better looking – measure of organic growth showed only a 15.5 percent hit.
Meanwhile, operating profit under IRFS slid 94.8 percent to EUR 85 million (USD 100 million), while net profit was wiped out – down 131.7 percent to a loss of EUR 297 million (USD 352 million).
Mexico, Europe and South Africa most affected
Although all of its regions suffered under the covid-19 pandemic, it was Europe (what Heineken calls its western and central European markets), Mexico and South Africa, which dragged group profit down massively.
The company’s off-premise sales in Europe saw “mid-teen” growth, and increased its market share. However, Heineken is heavily present in the on-premise in this region, which meant its operating profit was “disproportionately affected” as venues were forced to close for months on end.
Heineken’s new CEO Dolf van den Brink, who took over from Jean Francois van Boxmeer earlier this year, said that sales to the on-premise were down 50 percent in the first half. And with the on-premise representing about 35 percent to 40 percent of Heineken’s business, that has had a major impact. Going forward, Heineken expects a gradual recovery but it will be very much two steps forward, one step backwards.
Heineken was also forced to write down EUR 548 million (USD 650 million) in the value of its assets, mostly in emerging markets. It wouldn’t say where. But Trevor Sterling, an analyst with Bernstein, told the Financial Times newspaper that the charge was probably related to a part of the business that has been weak in recent years and coronavirus tipped it over the edge. The group’s Nigerian business, for example, would fit this description, he added.
