Heineken profits from developing markets

Heineken, the world's third largest brewer, reported higher first-half earnings than expected with a surge in profit in developing economies and tight control of costs in mature markets.

The Dutch company, the brewer with the greatest sales in Europe, said today that operating profit before one-offs grew 5 per cent to €1.45 billion compared with €1.42 billion forecast by observers.

On a like-for-like basis the number was unchanged from a year earlier. The group, which brews Europe’s best-selling Heineken lager, Sol, Tiger and Strongbow cider, said operating profit in emerging markets as a whole grew by 7 per cent on an equivalent basis and now made up half of earnings for the group.

The brewer has a greater share of the sluggish western European market than its rivals.

However, it has boosted its presence in emerging markets with its 2010 purchase of the brewing business of Mexico's Femsa and by taking full control last year of Asia Pacific Breweries.

The company said it had achieved €139 million in savings from a new cost reduction plan in the first six months of the year, the main gains coming from the Americas and western Europe.

However, it said a poor spring in Europe will hold back revenue this year, adding that profit before some items won’t grow as consumers in the region rein in spending.

Sales have suffered a “further moderation versus what we had expected after the first quarter,” chief executive Jean-Francois van Boxmeer said today. “The second quarter is clearly below our expectations for well- documented reasons, and that will have an impact on total outlook for the year.”

Group beer volume fell 3 per cent in the first half on an organic basis, led by a 8 per cent decline in western Europe after France raised taxes on beer and cold weather constrained sales, the brewer said in a statement.

Heineken had said in April revenue and volume would improve this year at a slower pace than previously anticipated after turmoil in Nigeria and slowing sales in Europe stopped drinkers buying as much beer in the first quarter. The company, which had not set an outlook for net income before some items, expects no organic growth this year on that measure. First-half net income on that basis was €679 million compared with €688 million a year earlier, the Amsterdam-based company said today.