Heineken reported a higher than expected rise in first-half net profit today after cost savings helped offset lower beer sales in Europe and the United States.
The Dutch-based brewer, whose chief brands are Heineken and Amstel, Europe's number one and three beers, said group beer volumes fell 2.3 per cent on a like-for-like basis, but costs savings, lower raw material and interest costs and its joint ventures led to a 17 per cent rise in net earnings.
The company said it remained cautious about beer consumption in Europe and the United States due to continued weak consumer spending and planned austerity measures, but expected volumes to grow in Latin America, Africa and Asia.
Heineken's first-half results included two months from the beer business of Mexico's FEMSA, bought to boost exposure to faster-growing emerging markets.
Just over half of Heineken's revenue last year came from western Europe. Heineken said the integration of FEMSA Cerveza was on track, with synergies due in the second half. Recent brewing results have been mixed. An upbeat Anheuser-Busch forecast greater growth in the second half after strong sales in Brazil and the soccer World Cup boosted second-quarter earnings.
Carlsberg, the fourth largest brewer, raised its 2010 outlook as the decline due to a tripling of tax on beer eased in its biggest market, Russia, and the stronger rouble boosted earnings. However, world number two brewer SABMiller last month reported a decline in beer volumes.
For the full year, Heineken forecast the percentage growth of net profit to be at least in low double digits with further cost savings and price hikes continuing to have some impact.
Heineken's net profit before one-offs increased to €621 million, boosted by €104 million from cost savings, broadly in Europe. Analysts had on average expected a net profit of €595 million. Operating profit was in line with expectations, revenue below.
"Costs savings were a little ahead of expectations, FEMSA's contribution too," said Trevor Stirling, analyst at Bernstein Research.
"I see no reason for the second half to be worse than the first. Eastern Europe should not be as bad and the US is improving ... The underlying dynamics are healthy"
Chief executive Jean-Francois van Boxmeer, describing the first-half as "robust", said a spike in world grain prices due to drought in Russia would have little impact as it bought crops a year in advance and typically hedged before the harvest.
"A big part of our needs for next year we have covered contractually and laid down our prices ... For the remaining part that we have to cover, we have to wait for the market to calm down," Mr Van Boxmeer told a conference call.
Reuters
