In this photo illustration, bottles of Heineken beer are seen on July 31, 2023 in San Anselmo, California.
Justin Sullivan |
Heineken shares fell throughout the day on Monday after the brewing giant’s first-half profit growth was weaker than analysts expected.
When the markets in Europe closed, the corporate’s share price was down 10.14 percent.
Operating profit showed organic growth of 12.5%, below the corporate’s consensus forecast of 13.2%.
Beer sales, which had been expected to grow by 3.4%, only rose by 2.1%.
Heineken plunged to a net lack of 95 million euros ($103 million), mainly on account of a non-cash impairment of 874 million euros on its investment in Chinese brewer CR Beer. Heineken said the write-down was the results of the decline in CR Beer’s share price on account of concerns about consumer demand in China, somewhat than the Chinese company’s operating performance.
“We are very pleased with the solid performance in the first half of the year,” Heineken CEO Dolf van den Brink told CNBC’s “Squawk Box Europe” on Monday, describing volume growth as “balanced and broad-based across our global footprint,” with a 5% increase in premium products.
In an update eagerly awaited by analysts, Heineken revised its forecast for organic operating profit growth for the yr to a spread of 4% to eight%. The company had previously forecast low- to high-single-digit growth.
“Heineken has gained momentum following optimistic comments at a recent conference, prompting the market (and ourselves) to revise our estimates,” Barclays analysts said in a note on Monday.
“However, these results fell short of forecasts, suggesting that there was a gap between the company’s messaging and analysts’ expectations. This needs to be closed.”
The biggest miss got here in Europe, where profit rose just 0.2 percent in comparison with expectations for 15.1 percent, largely on account of increased promoting spending in a competitive market, Barclays said.
Heineken said it had consolidated its leadership position in low-alcohol and non-alcoholic beers, with sales of Heineken 0.0 – a non-alcoholic beer – rising 14%. The category saw double-digit growth in markets reminiscent of Brazil, Egypt, Vietnam and the UK.
Van den Brink described the category on Monday as “increasingly important” for the corporate, especially Heineken 0.0.
Market research suggests that growth in low- and non-alcoholic products, including beer, will significantly outpace the expansion of the overall alcohol industry in the approaching years, making this space a key goal for each established brands and latest entrants.
Van den Brink also said that pressure on the corporate’s input costs had eased considerably.
“In Europe and America, input costs were much, much lower than last year, so we were able to charge much lower prices. That’s very important to get our revenue growth back in balance, both with volume and price growth,” he told CNBC.
