Currency hinders Heineken's search for growth

Related tags Cent Europe Eastern europe

Heineken reported strong sales growth last year, driven by
acquisitions, but impaired profitability as currency movements took
their toll.

In North America, the group's second largest market after Western Europe, results were depressed by the weakening dollar. This was likely to hit profits further in 2004, the group warned.

Nonetheless, overall group sales rose by 9 per cent, to €9,255 million in 2003, pushed by the acquisition of large regional brewing company BBAG, concentrated in Austria and central Europe.

Heineken meanwhile achieved organic sales growth of 3 per cent.

At the same time, profitability was pared back, with operating profits accounting for 13 per cent of sales last year, compared with 15 per cent the previous year. This was entirely regionally driven. Heineken's American beer business reported a decrease in operating profit from €416m to €358m last year. While the Western European business increased operating profits from €553m to €584m.

The dollar effect fell disproportionately within direct costs, most notably affecting spending on raw materials - the cost of which rose by 19 per cent between 2002 and 2003 - but also packaging and transport costs.

The group also took greater restructuring charges than in the pervious year, at €74 million in 2003 compared with €48 million in 2002, as it reorganized its domestic operations in the Netherlands.

Meanwhile, Heineken continued to gain from investments in Eastern and Central Europe, including the acquisition of BBAG, with sales in Poland - the region's biggest market - rising by 9 per cent.

It advanced little in the world's most rapidly growing beer market, China, last year, but in recent weeks has acquired an interest in Guandong Brewery Holdings and in April will begin local production of Heineken within China. The Chinese beer market is now growing at around 5 per cent a year, compared with 1.7 per cent for the global market.

In Western Europe, beer consumption was down 0.1 per cent, while it rose by 4.3 per cent in Central and Eastern Europe and 0.2 per cent in South America.

Related topics Manufacturers Heineken

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