Heineken reports lower profit in 9-months despite 2% volume growth

Heineken N.V. said on Wednesday that net profit for the 9-months to the end of September fell 30% to €1.239bn, from €1.776bn it made in the preceding year. The decline was as a result of a one-time book gain of €379m it made from the sale of EMPAQUE, a Mexican packaging operation which boosted 2015 sales.

However, the brewer noted that beer volumes rose 2% despite the decline in profits – with stronger volumes seen in the Americas, Asia Pacific region and Europe offsetting declines in Africa, Middle East and Eastern Europe.

The company said that beer volumes in its premium segment grew 3.5% in China, South Africa and Brazil which offset weaker volumes in US, Greece, Vietnam and Russia.

In Africa, the brewer saw a 3.6% volume decline, with weaker trends seen primarily in Egypt and DRC, which more than offset growth in Nigeria, Ethiopia and Algeria.

The company noted that beer volumes increased in the low single-digit in Nigeria. However, underlying trading conditions remained difficult as weak macroeconomic environment and low consumer sentiment continue to impact negatively on brand mix. Although the Naira devaluation on 20th June 2016 initially helped in terms of liquidity, the Naira has continued to weaken, which will have further impact on margins.

The brewer said that volumes in Russia declined by double-digit as the market remained under pressure and volume was also adversely affected by high promotional price pressure.

In the Americas, organic volumes rose 3%, with strong performance in Mexico and the Caribbean. However, results in Mexico were adversely impacted by currency exchange in the second-half.

Brazil which is beset by weak macroeconomic conditions posted volume declines in the mid-single digit; however, Heineken’s premium brand performed well with double-digit growth in the Heineken brand and Amstel.

The U.S. market also saw volume declines in premium brands like Heineken but with positive growth in Mexican brands such as Tecate.

Asia Pacific region was a particular bright spot for the brewer, with 15.1% volume growth, driven by strong performance in Vietnam and Cambodia. In Vietnam, the Tiger brand continued to be the key growth driver, with double-digit gains.

Indonesia also witnessed single-digit growth of low alcoholic and non-alcoholic brands. In Cambodia, volumes continued to grow double digit, benefiting from capacity added by the brewer earlier this year. China performed equally well, with strong mid-single digit performance in the Heineken brand.

Europe rose to the occasion, helped by good weather in most European markets. Volumes increased 0.6%. Spain, Netherlands France and Italy all posted positive volume growth. However, volumes were flat in Poland and declined in Romania, Austria and the U.K. partly due to tough comparatives.

Jean-Francois van Boxmeer, Chairman and CEO of Heineken, said:

Performance in the third quarter was robust despite strong comparatives in Americas and Europe, and a tough environment in Africa, Middle East & Eastern Europe. Strong performance continued in key markets such as Vietnam and Mexico, with Europe also showing further positive momentum. Our full year margin expectations remain unchanged despite continued adverse economic conditions in some developing markets, as well as increasing currency headwinds.

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