Heineken’s First-Quarter Revenue Exceeds Analysts’ Estimates

Heineken NV (HEIA), the world’s third-biggest brewer, reported first-quarter sales that beat analyst estimates, as demand for its namesake beer surged in markets including Nigeria and Brazil.

Revenue gained 3.4 percent, compared with the 2.9 percent median estimate of 12 analysts surveyed by Bloomberg News, Amsterdam-based Heineken said. Beer volume rose 1.5 percent compared with the 1.6 percent median analyst estimate. Both figures are reported on a so-called consolidated basis, and exclude effects of acquisitions, disposals and currency swings.

“It is particularly pleasing to note that two of the group’s growth engines, Africa and America, are kicking back into gear,” Jonathan Fyfe, an analyst at Mirabaud, wrote. “We are confident today’s numbers confirm a reacceleration at Heineken and suggest the downgrade cycle has finally come to an end.” Fyfe, who has an “accumulate” rating on the stock, plans to review his forecasts today.

After a drop in profit last year, Heineken is anticipating stronger sales in 2014 as some economies start to improve. The brewer is looking to expand sales of pricier beers such as the eponymous flagship Heineken brand, which rose 8 percent in the quarter. It’s also turning to developing markets to offset European stagnation, and bought control of its joint venture Asia Pacific Breweries in 2012 for about S$5.6 billion ($4.5 billion).

Russia Challenge

Central and Eastern European sales fell in the quarter, dragged down by “continued challenging beer market conditions” in Russia, where the government has been cracking down on sales of beer from so-called kiosks and restricting alcohol advertising, as well as declines in Poland.

Heineken’s shares rose as much as 1.8 percent before trading down 1.1 percent at 50.61 euros as of 11:08 a.m. in Amsterdam. Competitor Carlsberg A/S, which derives about a quarter of its revenue from eastern Europe, fell 0.5 percent in Copenhagen.

“We are encouraged by a positive start to the year with continued improved top-line growth momentum in Africa Middle East and the Americas,” Heineken Chief Executive Officer Jean-Francois Van Boxmeer said in the statement. That’s helping offset challenging conditions in Russia, he said. The company reaffirmed its outlook for sales improvements this year.

‘Positive Surprise’

Revenue rose 1.8 percent and volume 2.1 percent in western Europe, the company said, as it benefited from the comparison with destocking in France in the same period a year ago after a tax increase. Volume improved in the Netherlands, Spain, Ireland and Belgium, offsetting declines in the U.K., Italy and Switzerland. Brewers have been struggling to drive growth in the region due to high competition and sluggish economic growth. Marco Gulpers, an analyst at ING in Amsterdam, described today’s results as a “positive surprise” in the region.

Revenue in the Americas soared 8.7 percent as the company raised prices in Mexico, which represents 13 percent of earnings, according to UBS estimates, and Brazil, where the company also benefited from improved economic conditions.

Sales in Africa and the Middle East also improved as Heineken sold more affordable beer and volume increased in Nigeria, the second-biggest beer market in sub-Saharan Africa. Asia-Pacific revenue edged up 0.3 percent and volumes fell 0.3 percent, dragged down by tough conditions in Vietnam where the company has also been restructuring its beer sales. “Softer economic conditions” affected some markets in the region.

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Robert Valpuesta

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