Heineken Ireland says trading remains weak

Heineken Ireland has described trading during the first six months as the “one of the most challenging” faced by the drinks industry here and said the outlook for next year remains “weak and unclear”.

Declan Farmer, head of corporate affairs with Heineken Ireland, said he does “see any positive outlook at this stage for 2010,” despite a positive performance by company’s Heineken and Coors lagers.

The addition of the Beamish and Crawford brands – which were acquired as part of Heineken’s £7.8 billion (€8.8bn) joint-takeover with Carlsberg of Scottish Newcastle last year – contributed to a 35 per cent increase in turnover to €211 million.

According to Heineken Ireland, this has resulted in its share of a declining Irish beer market rising to 27 per cent. The value of the Irish beer market has fallen 3 per cent to €3.17 billion and has declined by 6.3 per cent in volume terms.

Heineken lager has a 28 per cent share of the market and remains the best-selling brand in the Irish market, the company said.

It said lager accounts for 60 per cent of the beer market with stout claiming a 34 per cent market share. In pubs lager and stout account for 46 per cent each but lager dominates off-licence sales with 88 per cent of the market.

Parent company Heineken said net profit for the first six months of the year was €489 million up 20 per cent from the same period in the previous year.

Price hikes contributed 6.2 per cent to Heineken's revenue growth, almost offsetting a 6.6 per cent volume decline. Wage costs rose slightly but energy/water and marketing costs fell.

The company's much-watched EBIT (earnings before interest and tax) before exceptionals increased to €993 million ($1.4 billion), up a like-for-like 13 per cent.

Heineken said it expected net profit before exceptionals to rise by at least a high single-digit percentage amount for 2009, reflecting further cost savings, price rises (albeit less marked than in the first half), slower growth in Africa and a negative exchange rate impact.

Net profit before one-offs rose 12 per cent in the first half.

"We are forecasting growth, which is good in the current economic environment, slightly at lower levels than in the first half," chief financial officer Rene Hooft Graafland said.

He said volume declined 6.7 per cent in the second quarter after 6.3 percent in the first, but said the drop was less marked for the Heineken brand and in the Americas, where Heineken is a premium beer.

By comparison, AB InBev reported a 1.1 per cent drop in second-quarter beer volumes, SABMiller Plc's underlying beer volumes were flat, while those of Carlsberg fell 6 per cent on a like-for-like basis.

Just over half of the Dutch brewer's revenue last year came from western Europe, where brewers are fighting over a shrinking beer market. There too, the second quarter had been less negative than the first, the CFO said.

"We're stressing value over volume," he said.

Heineken involvement in western Europe grew after it bought UK-based Scottish & Newcastle (S&N) with Carlsberg for £7.8 billion ($12.78 billion) in 2008, chiefly getting S&N's British assets.

Heineken said its "Total Cost Management" (TCM) savings plan had yielded 50 million euros of savings in the first half, equivalent to an annualised 120 million.

"We see substantial opportunity to drive down our cost base in the second half of the year and beyond," chief executive Jean-Francois van Boxmeer said in a statement.

Reuters