- Brewer cuts 2023 profit forecast amid Asia slowdown
- Price hikes put off Vietnamese drinkers
- Chief executive expects second half profit turnaround
Dutch brewing behemoth Heineken (HEIA:AMS) served up organic first half sales growth of 5.5% after pushing through record price increases to offset ‘unprecedented inflation levels’.
However, shares in the world’s second-largest brewer by volume fell 5% to €92 after the company cut its 2023 profit growth forecast after a slowdown in Vietnam and the impact of price hikes on volumes hurt first-half earnings.
APAC DISAPPOINTMENT
Heineken now expects 2023 operating profit growth before one-offs to be flat-to-mid-single digit, having previously forecast mid-to-high-single-digit growth.
Organic revenues frothed up 5.5% in the half thanks to price increases, which the firm said it had 'front-loaded' this year, although this resulted in a 5.6% drop in organic beer volumes and sent like-for-like operating profit down by a worse-than-expected 8.8% to €1.94 billion.
A combination of price increases and a challenging economic backdrop led to a 7.6% organic decline in the second quarter.
First half results in Asia Pacific, the brewer’s most profitable region, were impacted by an economic slowdown, notably in key market Vietnam, not to mention ‘socio-economic volatility in Nigeria’ and a softer beer market in the Americas.
Asia Pacific beer volumes softened by 13.2% on an organic basis, while operating profit reduced by about a third.
In Europe, the region seeing the highest inflationary impact, volumes declined in line with management expectations.
Outside of Vietnam and also Russia, where Heineken is seeking an exit but has yet to find a buyer for its ‘financially ringfenced’ business, the company insisted premiumisation trends ‘remain strong’ driven by namesake brand Heineken, which is Europe’s best-selling beer and turns 150 this year.
WHAT DID THE CEO SAY?
‘In the second half, we expect pricing to moderate with volume trends gradually improving to a low-single-digit decline,’ said chairman and CEO Dolf van den Brink.
‘On productivity, we expect a significant acceleration relative to the €200 million in gross savings of the first half. Overall, we expect a strong turnaround in operating profit growth in the second half and for the full year expect stable to a mid-single-digit operating profit organic growth.’
