Heineken Sees 2014 Sales Advancing After Annual Profit DropClementine Fletcher
Heineken NV, the world’s third-biggest brewer, expects sales to advance this year after reporting a decline in 2013 profit amid weak consumption in central and eastern Europe.
Volume will improve on an organic basis in fiscal 2014, the Amsterdam-based company said today in a statement, and sales will advance as a “gradual economic recovery” helps trading in some of its markets. Group organic beer volume fell 2.7 percent last year and consolidated organic revenue slid 0.9 percent.
Central and eastern Europe have been particularly difficult of late for Heineken, which cut its outlook for the year at the time of its third-quarter results in October. The maker of Strongbow cider and Amstel beer also cited a “delayed” economic improvement in countries including Nigeria and Mexico at the time. Annual net income before some items fell by 4.6 percent to 1.59 billion euros ($2.2 billion), matching the average estimate in a Bloomberg survey of 17 analysts.
“Our first read of the results leaves us feeling a little more positive on Heineken,” Jonathan Fyfe, an analyst at Mirabaud Securities in London, wrote in a note today. “After a particularly tough year the outlook for 2014 looks more positive.”
Heineken rose 3.2 percent to 48.62 euros in early Amsterdam trading. The shares had fallen 4 percent this year through yesterday.
Europe’s beer market is struggling for growth as already-high levels of consumption and waning consumer confidence due to government austerity measures drag on sales. Companies from Unilever to Diageo Plc have pointed to political uncertainty and slowing growth in some key emerging economies, previously seen as a panacea to counterbalance the more developed markets of the U.S. and Europe.
“2013 was a challenging year as slower economic growth in a number of key markets and adverse regulatory developments impacted performance,” Heineken Chief Executive Officer Jean-Francois van Boxmeer commented in the statement, saying the company saw improved volume in western Europe in the second half of the year.
Heineken said today it expects volume growth in developing markets in Africa Middle East, Asia Pacific and Latin America compared with lower consumption in Europe. Emerging markets are “for our industry, intrinsically and inherently still markets for growth” due to young and growing populations, van Boxmeer said today in a call with journalists.
The company will step up marketing and selling spend to drive sales in Europe, and sees “new restructuring opportunities” on top of planned cost savings, including further centralizing of procurement and business services in Europe. The eponymous Heineken brand’s sales fell 1.8 percent last year, led by a 5.1 percent decline in its western European heartland, as tax increases in France and a decision to focus on Tiger beer in Vietnam dragged sales down.