Heineken forecasts a return to growth

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br heineken Bloomberg Heineken, the Dutch brewer of Europe's top selling lager, expects beer sales in Africa, Latin America and Asia to drive a return to revenue growth this year after a slowdown in emerging markets led to flat turnover last year. It predicts volume growth and cost cuts will help improve its margin. Photo: Bloomberg

Brussels - Heineken expected a return to revenue growth this year with higher beer sales in Africa, Asia and Latin America after a slowdown in several emerging markets last year, the third-largest brewer predicted yesterday.

The Dutch maker of Europe’s top-selling Heineken lager, as well as Mexican beer Sol and Strongbow cider, said 2013 had been challenging, with difficulties in eastern Europe, Latin America and Africa.

It said revenue grew by 0.1 percent last year as price rises failed to offset a decline in overall volumes. For 2014, it said revenue should grow on a like-for-like basis, excluding currency translation effects.

Growth and cost cuts should help its operating margin improve, it said. Heineken expects its latest three-year savings plan to hit its e625 million (R9.4 billion) target this year.

Its shares were among the strongest European blue chip performers yesterday, rising 3.2 percent to a four-week high.

“There was no growth last year, so some growth in the next is better. I’d describe it as mildly optimistic after what has been a very weak year in 2013,” said Trevor Stirling, beverage analyst at Bernstein Research.

“The drag came from central and eastern Europe and the Americas, and Africa didn’t deliver the level of organic growth expected.”

Europe’s largest beer seller has a greater share of the sluggish western European market than rivals, but has boosted its emerging market presence by expanding into Mexico in 2010 and buying out its joint venture partner in Asia in 2012.

Heineken warned in October last year that it expected net profit before one-off items to fall by a low single-digit percentage for the full year. In fact, it fell by 2 percent on a like-for-like basis to e1.59bn, in line with analysts’ predictions.

It said volumes had improved in western Europe, Africa and the Middle East in the second half, with a pick-up in the large markets of Nigeria, the Republic of Congo and the Democratic Republic of Congo in the fourth quarter.

“We had a good last quarter in Nigeria. You see an increasing value segment, in which we participate, but a brand like Heineken continues to grow,” chief executive Jean-Francois van Boxmeer said.

In Mexico, where economic reforms have been enacted, he saw early signs of growth. Moody’s Investors Service gave the country an “A” grade sovereign rating this month.

Diageo, the largest spirits maker, suffered lower demand in China and other emerging markets due to tax hikes, discounting by rivals and a Chinese government crackdown on gift-giving.

Second-biggest brewer SABMiller said last month that depreciation of key currencies against the dollar had hurt its results.

Heineken said currencies were likely to hit revenues and profit this year. Based on current spot rates, operating profit would take a hit of E115m and net profit E75m. – Reuters


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