Dutch giant Heineken NV reported a sharp decline in profit and announced plans to cut spending, citing disappointing sales from British assets acquired last year.
Heineken said today that net income for 2008 fell 74 per cent to €209 million ($263 million), hurt by €757 million of charges related to writedowns of British, Russian and UK assets.
The former Scottish & Newcastle units, whose brands include Cork city-based Beamish Crawford and account for a quarter of Heineken's sales, had "lower-than-expected profits," chief executive officer Jean Francois van Boxmeer said by phone.
The Competition Authority gave Heineken NV permission to take over Beamish and Crawford last October following an inquiry that lasted six months.
The UK beer market shrank by 5.5 per cent last year, hurt by a pub smoking ban and higher taxes, and has worsened as the nation slides into recession.
"They paid too much for S&N," Gerard Rijk, an analyst at ING in Amsterdam, said before the results. "They need to take action to fight the crisis."
Heineken didn't give any forecast for full-year profit growth. "I don't have a crystal ball," van Boxmeer said.
Excluding acquisitions and the charges, earnings before interest and tax rose 8.7 per cent, less than 2007's 20 per cent increase. Sales rose 27 per cent to €14.32 billion. The quantity of beer sold, excluding acquisitions, gained 3.6 per cent.
That beat Heineken's previous target of at least "mid-single digits" percentage growth.
The brewer will focus on cost-cutting "everywhere in the company" as it no longer expects the S&N deal to add to earnings per share by 2012, as originally planned. Cost savings from the acquisition have reached 40 million euros so far.
"One thing that all the brewers have in common is the prospect of material cost savings," Investec analyst Anthony Geard said in an e-mailed note.
The Dutch brewer and rival Carlsberg A/S split up Scottish & Newcastle in a deal worth about $15 billion last year, with the Danish company getting the Russian assets.
Bloomberg