Heineken records higher growth in half-year despite currency pressure in emerging markets

Dutch brewer Heineken N.V. said on Monday that net profit fell 49% to €586m in the first-half of 2016, after removal of exceptional items. It added that if it hadn’t been for the exceptional items, net income would have been  €977m ($1.1bn), a 6.8% increase from last year’s €915m.

Heineken reported strong results in half-year as demand for its products in Asia and Western Europe offset weaknesses in Africa, Middle East and Eastern Europe.

Heineken’s Chief Executive Jean-Francois van Boxmeer said while the company had “performed well in volume, revenue and profits,” the downside had been its “subdued performance in Africa and the Middle East.”

He cited Nigeria as an example of a country which had been “an uninterrupted growth story for the last 11 years” and that the fall in oil prices were the “basis for Nigeria’s turmoil and the same is true for Russia.”

The Heineken boss prayed for the good old days of higher oil prices. “We are facing some currency headwinds. The market is holding up really well I must admit, but of course people will grab for the cheaper beers in our assortment rather than the premium beers and, that will last for some months to come and we have only to pray for higher oil prices.”

Van Boxmeer said that cuts to investment and jobs are possible across the broader region if productivity targets are not met.

He noted that while markets in Africa, Middle East and Eastern Europe remained challenging, performance was strong in some key developing markets such as Vietnam, where the Tiger brand had been roaring, and in Mexico.

However, the company said it missed sales targets in the Americas partly due to “slight decline” in Brazil and the U.S.

The brewer also reported double digit volume growth in Cider, particularly Strongbow in Europe and the Americas.

Heineken said that reported revenue for the first-half of the year rose 2% from last year to €10.1bn, or 4.7% higher on an organic basis – before exceptional items and constant currencies are removed. The exceptional items include €538m currency charge for the Nigerian Naira, Mexican pesos, Russian rouble and the British pound against the euro. The company also took an asset write-down of €233m in the Democratic Republic of Congo for the closure of a brewery due to political and economic upheavals in the country.

Despite the currency issues in Africa, van Boxmeer remained highly optimistic in the future of the region.

“The African and Middle-East regions remain a growth area for Heineken,” he said.

Van Boxmeer added that it was sticking to its forecast for the rest of the year, saying there would be “tough comparatives and increasing currency headwinds in the second-half.”

On the pending merger between two of the world’s biggest brewers, AB InBev and SABMiller, which, would leave Heineken a distant second, Laurence Debroux, Finance Director for Heineken, said it would not change the industry dynamics of fighting for sales “market by market”.

“We don’t see any fundamental change or attitude. We have a global brand but we’re selling market by market and we don’t see the merger changing that,” she said.

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