Agro Perspectiva

Heineken Net Beats Estimates on Closures, Lower Debt

26.08.2010 10:58 "Agro Perspectiva" (Kyiv) — Heineken NV, the world’s third- largest beermaker, posted first-half profit that beat analysts’ estimates as the company closed breweries and cut debt. Savings from a three-year cost reduction program amounted to 104 million euros in the first half as the brewer sought to combat falling volume in Europe and the U. S. Heineken said it’s «cautious» on the outlook for beer consumption in developed markets, while expecting continued volume growth in the emerging regions of Latin America, Africa and Asia. «Organic net profit growth is very strong, and in particular we saw good delivery on the cost savings,» said Trevor Stirling, an analyst at Sanford C. Bernstein in London. «Overall, this is a good set of numbers.» Heineken rose 49 cents, or 1.4 percent, to 35.25 euros as of 9:27 a.m. in Amsterdam trading. Breweries in the English towns of Reading and Dunston were closed in the period, helping cut costs, Heineken said. Net interest expenses were reduced to 239 million euros from 264 million euros, mostly due to debt reduction, it said. First-half sales at the maker of Amstel lager and Strongbow cider rose 5.2 percent to 7.52 billion euros. Excluding acquisitions, revenue declined 2 percent, Heineken said. The volume of beer sold, excluding acquisitions, fell 2.3 percent, beating the median analyst estimate for a 4.6 percent drop. The decline was led by a 9.4 percent slump in central and eastern Europe, which contributed about a fifth of operating income last year. Heineken attributed the reduced volume to the weak economic environment and increases in beer excise duty, particularly a 200 percent increase in Russia. Volume in western Europe, the company’s biggest profit contributor, fell 2.5 percent, as consumers cut spending amid high unemployment and as unfavorable weather crimped demand. In Africa and the Middle East, volume jumped 7.2 percent, the company said, helped by growth in Nigeria and South Africa. Heineken is working to expand capacity at the Sedibeng brewery, which opened near Johannesburg this year. The brewery is owned by Brandhouse Ltd., the company’s joint venture with Diageo Plc. Heineken said it doesn’t expect fluctuating grain prices, which have been spurred by Russian export bans after a record drought, to greatly affect the company or lead to price increases in 2011. «We have a policy of hedging our crops before the harvest for a large part of our crop, so the variation for next year will have a limited increase,» Chief Executive Officer Jean- Francois van Boxmeer said today on a conference call. «Except for Russia and central Europe, crops are doing well, and I do not forecast extraordinary effects.»