Heineken Sales Beat Estimates as New Beers Fuel Europe Gain

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Heineken 1H Group Revenue EU10.9B

Heineken NV, the world’s third-largest brewer, reported first-half sales that beat analysts’ estimates as it introduced more products to drive higher prices in regions of sluggish demand such as Europe.

Sales rose 6.7 percent to 9.9 billion euros ($10.9 billion), Amsterdam-based Heineken said Monday in a statement. That exceeded the 9.76 billion-euro median of estimates compiled by Bloomberg. Heineken shares rose as much as 5.2 percent, the most in almost a year.

Europe has been a difficult market for brewers lately due to fierce price competition. SABMiller, the maker of Grolsch, reported quarterly sales that missed estimates amid plunging sales in Poland, while Anheuser-Busch InBev NV, the world’s largest brewer, saw European beer volumes plummet 7.5 percent in the most recent period. Heineken’s first-half volume rose 0.9 percent, more than analysts estimated.

“We can’t fault the composition of these results,” said James Edwardes Jones, an analyst at RBC Capital Markets.

New products added 854 million euros to first-half revenue, helped by lemon-soda Radler beers and The Sub, a home draught beer device. Such innovation helped volume grow in France, the Netherlands and Spain, impressing analysts who had expected the brewer to fall short of last year’s performance, which was aided by good weather and the soccer World Cup.

Higher pricing in Russia to limit the damage from the ruble’s devaluation and restarting business with a distributor in Poland also boosted sales.

Deflationary Period

“Consumer goods companies in Europe are in a deflationary period owing to tough competition,” Chief Executive Officer Jean-Francois van Boxmeer said by phone. “The way that we remain competitive is by investing more in innovation and new products.”

Heineken got 8.6 percent of sales from new products, ahead of a prior goal of 6 percent. The brewer said it plans to start selling The Sub in China, its fifth market, this month.

Adjusted earnings before interest and taxation rose 6.5 percent to 1.55 billion euros. Analysts expected 1.53 billion euros. The stock rose 5 percent to 75.30 euros as of 11:57 a.m. in Amsterdam.

Revenue per hectoliter of beer will increase in the second half, driven by developing markets, where Heineken has sought growth amid stagnant beer consumption in Europe. Weakening economies in Russia and Nigeria, along with increased regulation of alcohol sales in Indonesia, could weigh on results, Sanford C. Bernstein analyst Trevor Stirling said in a note before the announcement.

“Indonesia is concerning,” Van Boxmeer said. “The law on distribution has dented our business quite significantly and the proposed ban on alcohol sales is an even more profound danger, but we will fight until the end to reach an agreement.”

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