Heineken Flags Moderating Growth as Quarterly Volume Falls

Heineken NV, the world’s third-biggest brewer, reined back its expectations for annual growth after reporting an unexpected decline in first-quarter sales, sending the shares down the most in 20 months.

So-called organic volume and revenue will improve this year at a slower pace than the company had anticipated as tough conditions in austerity-hit markets in Europe as well as a slowdown in Nigerian sales hold back purchases, Heineken said today. The brewer hadn’t previously given a specific forecast.

Heineken fell as much as 6 percent in Amsterdam trading, the steepest intraday decline since Aug. 24, 2011. In addition to sliding sales in western Europe, the brewer also reported lower volume in the central and eastern part of the continent, Asia Pacific and the Americas.

“It was always going to be a tough quarter, but it seems to have been even worse than feared,” Jonathan Fyfe, an analyst at Mirabaud Securities in London, wrote in a note to clients today. “We expect to lower our forecasts.”

The shares dropped 5.6 percent to 54.47 euros as of 9:54 a.m. in Amsterdam, trimming this year’s gain to 8.3 percent.

Consolidated lager volume, excluding the effect of acquisitions, dropped 4.7 percent, the brewer said, missing the median estimate of 12 analysts for a 0.6 percent increase. Revenue excluding currency swings and acquisitions dropped 2.7 percent compared with a median estimate for a 2 percent rise.

Russian Tax

Heineken, which gets the largest portion of its revenue from western Europe, posted an 8.8 percent decline in beer volume in the region. Central and Eastern European volume dropped 3.7 percent as Russian beer tax increases and regulation to stop sales of the drink in freestanding kiosks cut demand.

Heineken is trying to offset stagnant developed markets with sales in faster-growing economies. It bought out its joint-venture partner’s stake in Asia Pacific Breweries for S$5.6 billion ($4.5 billion) last year to gain greater control over south-east Asian markets including Vietnam. The APB integration is “progressing well,” Heineken said.

Consolidated beer volume in Asia Pacific fell 1.4 percent. Volume in the Americas also fell as Mexican demand waned due to bad weather and the Brazilian beer market declined. The volume of the eponymous Heineken brand fell by 4.7 percent on an organic basis.

Unfavorable currency movements reduced revenue by 34 million euros, or 0.9 percent, the company said.

Earnings before interest and taxation slid at a pace in “mid single-digits,” excluding some items and the effect of acquisitions and currency fluctuations, Heineken said.

Accounting Change

“Global market conditions remain volatile, contributing to a weaker-than-expected first quarter,” the brewer said. “Challenging trading conditions in austerity affected markets in Europe and inflationary pressures in Nigeria are expected to continue to impact volume development for the balance of the year, leading to a moderation in organic growth expectations.”

Results for the year will also be affected by a charge related to a change of accounting standards, reducing adjusted net profit by 75 million euros, the company said. Analysts had expected annual profit on that basis of 1.86 billion euros.

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