New products help Heineken beat forecasts on first-half sales

Heineken, the world's third-largest brewer, reported first-half sales that beat analysts' estimates as it introduced more products to drive higher prices in regions of sluggish demand such as Europe.

Sales rose 6.7 per cent to €9.9 billion, Heineken said Monday in a statement. That exceeded the €9.76 billion-euro median of analyst estimates.

Heineken shares rose as much as 5.2 per cent, the most in almost a year.

Europe has been a difficult market for brewers lately due to fierce price competition. SABMiller, the maker of Grolsch, reported quarterly sales that missed estimates amid plunging sales in Poland, while Anheuser-Busch InBev, the world’s largest brewer, saw European beer volumes plummet 7.5 per cent in the most recent period.

“We can’t fault the composition of these results,” said James Edwardes Jones, an analyst at RBC Capital Markets.

New products added €854 million to first-half revenue, helped by lemon-soda Radler beers and The Sub, a home draught beer device. Such innovation helped volume grow in France, the Netherlands and Spain, impressing analysts, who had expected the brewer to fall short of last year’s performance, which was aided by good weather and the soccer World Cup.

Higher pricing in Russia to limit the damage from the ruble’s devaluation and restarting business with a distributor in Poland also boosted sales.

“Consumer goods companies in Europe are in a deflationary period owing to tough competition,” chief executive Jean-Francois van Boxmeer said. “The way that we remain competitive is by investing more in innovation and new products.”

Heineken got 8.6 percent of sales from new products, ahead of a prior goal of 6 percent.

The brewer said it plans to start selling The Sub in China, its fifth market, this month.

Adjusted earnings before interest and taxation rose 6.5 per cent to €1.55 billion.

Revenue per hectolitre of beer will increase in the second half, driven by developing markets, where Heineken has sought growth amid stagnant beer consumption in Europe.

Weakening economies in Russia and Nigeria, along with increased regulation of alcohol sales in Indonesia, could weigh on results, Sanford C. Bernstein analyst Trevor Stirling said in a note before the announcement. – Bloomberg