- Robust growth in 2024
- Strong demand for premium beers
- €1.5 billion buyback launched
Investors re-acquired a taste for Heineken (HEIA:AMS) stock after the Dutch brewer delivered forecast-beating full-year earnings, hiked the dividend 7.5% to €1.86 and launched a two-year €1.5 billion buyback.
There was also relief as the globe’s second-biggest brewer guided for tasty operating profit growth in the 4% to 8% range for 2025, underpinned by ongoing investments in marketing, digital capabilities and sustainability.
Heineken’s shares surged 12% to €76 in Amsterdam as investors applauded better-than-expected beer sales and management’s refreshingly upbeat outlook despite the challenges facing the business, including inflationary pressures, weak consumer sentiment in Europe and tariff uncertainty.
SERVING UP A BEAT
Heineken’s full-year 2024 results revealed operating profit up 8.3% to €4.5 billion, ahead of the €4.4 billion analysts were looking for, and earnings per share of €4.89, which topped the €4.62 consensus estimate.
While revenue fell 1.2% to €36.1 billion, organic beer volumes rose 1.6%, ahead of the 1.3% consensus estimate.
Heineken’s fourth-quarter organic volume growth accelerated to 1.8%, up from 0.7% in the third quarter despite soft, bad weather-blighted European beer volumes.
Premium beer volume increased organically by 5.2% last year with the namesake Heineken brand spearheading the growth, complemented by the group’s international and local premium brands including Kingfisher Ultra, Desperados and Birra Moretti.
Donald Trump has threatened 25% tariffs on Mexico and Canada, levies on goods from Europe and imposed 25% duties on all imported steel and aluminium.
While these moves would impact brewers by driving up the price of cans or dampening sales of imported beer, the US accounts for less than 5% of Heineken’s global sales, so it should be cushioned from much of the impact.
EVERGREEN STRATEGY PAYING OFF
Chief executive Dolf van den Brink said Heineken’s beer volume expanded in all four regions last year and across both developed and emerging markets as the group’s EverGreen strategy ‘continued to shape operations. Premium volume grew 5%, led globally by Heineken, which was up 9%,’ enthused van den Brink.
‘Mainstream beer volume rose 2%, spearheaded by the leading brands in our largest markets, including Amstel in Brazil, Cruzcampo in the UK, and Kingfisher in India. The beyond beer segment grew 4%, led by Desperados globally and Savanna cider in Southern Africa. Heineken 0.0 grew 10%, reinforcing our global leadership in non-alcoholic beer.’
Russ Mould, investment director at AJ Bell, observed that Heineken ‘got the party started in Europe’ after better-than-expected operating profit growth and a pleasant surprise with volume growth.
Investors were also treated to a €1.5 billion share buyback. ‘The plethora of good news represents a big turning point for the drinks giant after a near-one-year decline for its share price amid a slow start to 2024,’ added Mould.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
