Heineken: ‘Economic conditions are expected to remain volatile’

By Rachel Arthur

- Last updated on GMT

The good news: growth in brand Heineken. The bad news: below-average margins in Brazil Pic:Getty/bizoon
The good news: growth in brand Heineken. The bad news: below-average margins in Brazil Pic:Getty/bizoon

Related tags Heineken Beer Brazil

Heineken champions the performance of brand Heineken, with volume up 7.5% and the promising roll-out of non-alcoholic Heineken 0.0. But the company reported lower operating profit margin across the business in HY2018 and has cut its guidance for full-year margins.

The world’s second largest brewer attributed lower operating profit margin in HY2018 to the consolidation of Brasil Kirin (which it acquired​ from Japan’s Kirin last year) - a business that is growing fast but has lower margins than the rest of the business. It also attributed the lower operating profit margin to adverse currency effects and higher input costs; and has consequently cut its guidance for full year operating profit margin.

Commenting on the release of the HY2018 results this morning, Jean-François van Boxmeer, Chairman of the Executive Board and CEO, said: "Top line came in strong in the first half, with organic net revenue growth across all regions. Europe was back to growth in the second quarter whilst the other regions maintained their positive momentum. The Heineken brand grew strongly by 7.5%.

“Operating profit margin was lower than last year mainly due to the consolidation of Brasil Kirin, adverse currency effects and higher input costs.

“In the second half, we expect a continuation of our revenue growth and an acceleration of our operating profit growth on an organic basis. We continue to invest steadily behind our brands, innovations, e-commerce platforms and commercial strategy.

“For the full year, given the marked acceleration of our business in Brazil with margins still below group average and the negative impact from currencies, we now expect the operating profit margin to decrease by approximately 20 bps."

Brand Heineken

In HY18, the company's organic revenue grew 5.6% with revenue per hectolitre up 1.1%. Consolidated beer volume grew 4.5% organically in the first half of the year. The underlying performance was stronger in the second quarter (up 4.6%) as Europe enjoyed good weather. 

Brand Heineken continues to benefit from global sponsorship platforms such as the UEFA Champions League and Formula 1, says the company.

Brand Heineken volume grew 7.5%, with ‘positive momentum’ in all regions and particularly in Africa, Middle East & Eastern Europe and the Americas. The brand grew double digit in Brazil, South Africa, Russia, UK, Nigeria, Mexico, Poland, Germany and Romania; as well as seeing ‘healthy growth’ in Italy, Argentina, Chile, China and Spain.

Heineken’s non-alcoholic drink – Heineken 0.0 – launched in the second quarter of 2017, is ‘performing strongly’ across the 33 markets it has rolled out to.

Meanwhile, volumes in the company’s Craft & Variety sector were up double digit; supported by the strong performance of local craft propositions as well as from international craft brands Affligem, Lagunitas and Mort Subite. Growth was particularly strong in the UK, Mexico, Italy, France and Hungary.

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