Amsterdam, 20 April 2011 – Heineken N.V. today announced its trading update for the first quarter of 2011.
|
|
|
|
|
The first quarter is seasonally less significant in terms of volume and profit contribution. In 2010, the first quarter represented 19% of consolidated beer volume and considerably less in terms of profit contribution.
Financial results
Revenue increased by 22% to €3,591 million. Organically, revenue grew 3.6%, as a result of higher volumes, whilst price and sales mix was stable. The net impact from consolidation scope changes contributed €518 million, with favourable exchange rate movements contributing a further €32 million.
Organically, EBIT (beia) grew by over 20%, reflecting higher volume and the realisation of ongoing TCM cost savings. The marketing spend ratio (marketing expenditure as a percentage of revenues) was lower compared with the prior year quarter. For the full year 2011, Heineken expects the marketing spend ratio to be above last year. Input costs per hectolitre were in line with the comparable prior year period. Net changes in consolidation scope and favourable currency movements increased EBIT (beia) by 24%. Heineken’s share of net profit of associates and joint ventures was substantially higher. We do not expect the organic EBIT (beia) growth achieved in the first quarter to be indicative of our full year performance.
Organically, net profit (beia) increased substantially due to higher EBIT (beia) and lower interest costs.
Reported net profit in the quarter was €151 million.
Change in consolidation scope in the first quarter
The main consolidation scope changes having an effect on consolidated volume, revenue and profit include:
|
|
|
The five breweries of the Sona Group acquired in January 2011 have not yet been consolidated.
Group beer volume
mhl | 2011 Q1 | 2010 Q1 | Change | Organic change |
Western Europe | 9.4 | 9.3 | +0.4% | +0.6% |
Central and Eastern Europe | 9.8 | 9.2 | +6.2% | +6.2% |
Africa and Middle East | 6.3 | 5.6 | +12% | +12% |
The Americas | 13.9 | 4.5 | +209% | +8.3% |
Asia Pacific | 6.5 | 5.5 | +18% | +11% |
Group beer volume | 45.9 | 34.2 | +34% | +6.7% |
Heineken® premium volume | 6.0 | 5.7 | +5.7% | +5.7% |
Consolidated beer volume
mhl | 2011 Q1 | 2010 Q1 | Change | Organic change |
Western Europe | 9.3 | 9.3 | +0.4% | +0.6% |
Central and Eastern Europe | 8.4 | 7.8 | +7.3% | +7.3% |
Africa and Middle East | 4.7 | 4.2 | +13% | +13% |
The Americas | 11.2 | 1.9 | +483% | +5.8% |
Asia Pacific | 0.2 | 0.4 | -31% | +7.0% |
Consolidated beer volume | 33.8 | 23.6 | +44% | +5.5% |
Group beer volume development: first quarter 2011
Group beer volume grew 6.7% on an organic basis, led by solid volume performances in Africa, the Americas and Asia Pacific regions and benefiting from a weak comparative period in Central and Eastern Europe.
Volume of the Heineken® brand in the international premium segment grew 5.7%, with particularly strong performances in Africa (+15%) and Asia (+12%). The largest contributors to this growth were Vietnam, Brazil, France, Russia, South Africa and Chile, which more than offset lower Heineken brand volumes in the United States and Greece.
Volume in Western Europe grew on an organic basis, supported by higher volumes in the UK, France and The Netherlands. Volume in Spain, Italy, Ireland and Portugal declined as these markets continue to be adversely impacted by difficult economic conditions.
Organic volume growth in Central and Eastern Europe was driven by strong volume gains in Russia compared to the first quarter of 2010, when volumes were impacted by higher pricing following the significant increase in excise duties. Volume also grew in Belarus, Austria, Romania, Germany and Serbia whilst volumes were lower in Poland and Greece.
Double digit volume growth continued in Africa and Middle East, reflecting solid trading performances in the Sub-Sahara region, partly offset by volume declines in Egypt following political unrest in the country. In January, Heineken announced the acquisition of five breweries of the Sona Group in Nigeria, alleviating capacity constraints. The Ethiopian government recently confirmed that Heineken has submitted the highest bids for two state-owned breweries in the country and the Company is now awaiting the outcome of this privatisation process.
The strong performance in the Americas was driven by first time consolidation of the beer operations of FEMSA and strong organic volume growth in Compania Cerveceria Unidas (CCU). Depletions in the USA during the quarter were lower. Volumes, on a pro-forma basis, increased in both Mexico and Brazil.
In Asia Pacific, volume increased 11% organically, driven by solid volume performances in all our key markets, including Vietnam, India and Taiwan. In March, Heineken-APB China (HAPBC) announced the strategic divestiture of its 21% stake in Kingway Brewery. As a result, Heineken will recognise a net gain of around €20 million in ‘Share of net profit of associates and joint ventures’ later in 2011.
2011 Outlook Update
Heineken remains confident in continued positive volume development in Latin America, Africa and Asia. Whilst we are witnessing gradually improving economic conditions in a number of countries in Europe and in the USA, consumers remain cautious with their spending behaviour, particularly in on-trade channels.
Heineken is focusing on increasing value and volume share in its key markets, supported by higher marketing investment and innovation. The Company targets an expansion of its high margin product portfolio, including the Strongbow Gold cider and Desperados brands. The new global multi-media campaign for the Heineken® brand will be launched in 30 markets in the first half of the year, including the key markets of USA, UK, Spain, Greece, Poland and Canada. The higher planned marketing spend in 2011 is expected to affect profit development in the near term, particularly across our European region. However, we expect this investment to support our focus on long-term brand equity building and further strengthen our leadership position in key markets.
Heineken continues to realise synergies from the acquired beer operations of FEMSA and confirms its previously stated cost saving target of €150 million by the end of 2013. As part of Cuauht?moc Moctezuma’s brand portfolio strategy, the Heineken® brand was launched in Mexico from 15 March 2011.
For the full year 2011, Heineken confirms its forecast of a low single digit increase in input costs on a per hectolitre basis.
Financial structure
The Company’s Hunt for Cash 2 programme continues to deliver results and is expected to contribute to the further reduction in the overall level of net debt and Net Debt/ EBITDA (beia) ratio in 2011. Heineken reaffirms its earlier expectation for a cash conversion ratio of approximately 100% for the full year 2011.
As of 15 April 2011, Heineken had purchased a cumulative amount of 13,117,233 shares in the open market and delivered 12,284,841 of these shares to FEMSA in relation to the Allotted Share Delivery Instrument (ASDI). On March 21st, Heineken N.V. announced that it has doubled the maximum value of the third phase of its existing share buyback programme to €300 million, running up to and including 16 June 2011.
Accounting adjustments
On 1 January 2011, Heineken changed its accounting policy with respect to employee benefits, consistent with industry practice and in accordance with the updated standard, IAS 19 Employee Benefits, as published by the International Accounting Standards Board. After the policy change, Heineken recognises all actuarial gains and losses arising from defined benefit plans in other comprehensive income.
This change was applied retroactively to the full year 2010, resulting in a €15 million and €11 million positive impact on ‘Results from operating activities’ and ‘Net profit’, respectively. The pro-forma adjustment results in a €298 million decline in ‘Total Equity’ for the full year 2010.
€ million | FY10 reported | Policy change | FY10 adjusted |
Personnel expenses | -2,680 | 15 | -2,665 |
Result from operating activities | 2,283 | 15 | 2,298 |
Income tax expenses | -399 | -4 | -403 |
Net profit | 1,568 | 11 | 1,579 |