Heineken demand falls with profits ‘stagnant’

Heineken, which has its Irish headquarters in Cork, said full-year profit will be stagnant as demand in western Europe stumbles, highlighting the Dutch brewer’s need to win the battle for full control of Asia Pacific Breweries Ltd (APB).

Heineken expects net profit before exceptional items and amortisation, and excluding acquisitions and currency swings to be “broadly in line” with the €1.58bn of 2011. The shares fell as much as 5.6%, the most in a year, as some analysts questioned whether it could meet that goal.

“The full-year guidance looks, quite honestly, pretty optimistic, particularly since western Europe isn’t going to get any better,” Melissa Earlam, an analyst at UBS in London, said.

Heineken has sought to offset the drop in demand with costcutting measures including brewery closures.

It raised its offer last week to gain control over APB after a month-long tussle to prevent a company connected to a Thai billionaire from disrupting its hold.

Heineken’s volume of beer sold in the first half rose 8.3% in Asia, the company’s fastest regional pace, while it dropped 2.9% in western Europe, Heineken’s biggest market.

“The business of APB provides direct access to two of the world’s most exciting growth regions for beer — South-east Asia and the Pacific Islands, and China,” chief executive Jean-François van Boxmeer said. “We are working towards a swift completion of the transaction.”

Heineken said it offered to buy its joint venture partner Fraser & Neave’s 40% stake in APB for about €3.5bn.

The company will focus on the integration of APB and growing brands in the region after the acquisition is completed, Van Boxmeer said.

Heineken, which controls about 8.8% of the global beer market, has the smallest emerging-markets presence of the world’s big three brewers. About 37% of operating income came from western Europe last year.

First-half earnings before interest and taxes, excluding some items, were €1.27bn, Heineken said. That compared with the €1.31bn average estimate of analysts.

Earnings slid 14% in western Europe. Heineken

announced a new savings programme in February, focused on more efficient global purchasing of commodities and services, to save €500m by 2014. The company had €85m of pre-tax savings in the first half.

Production costs will rise 8% this year, after the price of goods to produce its beer increased 6.9%.

— Bloomberg


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