Heineken N.V. delivers solid top-line and earnings growth in 2011

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Heineken N.V. today announced:

  • Top-line: Revenue grew 3.6% organically, driven by total consolidated volume growth of 2.1% and revenue per hectolitre growth of 1.5%. Group beer volume increased 3.6%, with growth in all regions driving global market share gains;
  • Heineken®: Volume growth of the Heineken® brand in the international premium segment accelerated to 5.4%, once again outperforming the overall beer market;
  • EBIT: Organic EBIT (beia) growth of 1.4% as higher revenues, cost savings and increased profit from joint ventures were partly offset by increased marketing expense, higher input costs and capability building investments;
  • Net profit: Net profit (beia) grew 9.2% organically to €1,584 million, driven by higher EBIT (beia), lower interest expense and a lower effective tax rate (beia). Reported net profit declined 1.2%, following an exceptional capital gain in 2010;
  • Total Cost Management (TCM): TCM delivered pre-tax savings of €178 million in 2011 and total savings of €614 million over the entire three year period; New €500 million cost saving programme (TCM2) launched covering 2012-14;
  • Cost synergies: Achieved cost synergies of €94 million in 2011, relating to acquired beer operations of FEMSA, bringing cumulative savings to €136 million;
  • Cash flow: Strong free operating cash flow generation of over €2 billion, resulting in a cash conversion ratio of 122%. Net debt/EBITDA (beia) ratio of 2.2x, in line with 2010, despite acquisition activity and accelerated completion of the ASDI share repurchase programme;
  • Dividend: Proposed total dividend of €0.83 per share, representing an increase of 9% compared with 2010 (€0.76).
Key figures1
(in mhl or € million unless stated otherwise)

Full Year 2011 

Full Year 2010 (restated)2

Change %

Organic growth %
Group beer volume213.9192.3113.6
Total consolidated volume194.4178.19.12.1
Of which: Consolidated beer volume164.6145.9133.2
Heineken® volume in premium segment27.426.05.45.4
EBIT (beia)2,6972,6232.81.4
Net profit1,4301,447-1.2 
Net profit (beia)1,5841,4568.89.2
Free operating cash flow2,0931,9935.0 
Net debt/EBITDA (beia)32.2x2.2x  
Diluted EPS (beia) (in €)2.702.584.7 
1 For an explanation of the terms used please refer to the Glossary in the Appendix. Unless otherwise stated, any reference to growth rates used throughout the report is calculated on an organic basis and volume relates to group beer volume.
2 2010 restated figures as disclosed in the half year report dated 24 August 2011.
3 2011 includes the Galaxy Pub Estate on a 12 month pro-forma basis; 2010 includes the beer operations of FEMSA on a 12 month pro-forma basis.

CEO STATEMENT Jean-Fran?ois van Boxmeer, Chairman of the Executive Board and CEO, commented:

“At the start of 2011, we said that we would significantly increase investment in our brands and innovation to drive long-term value and volume growth. This strategy helped us to deliver organic volume and revenue growth across all five reporting regions for the year. We also grew the bottom-line organically in 2011, with 9.2% net profit (beia) growth.

Our successful activation of the Heineken® brand and investment in global priority brands such as Desperados and Strongbow Gold supported global share gains. Our innovation rate reached 4.1% at the end of 2011 and we are well on our way to achieving our goal of 6% by 2020.

The Heineken® brand continued to outperform the international premium segment and overall beer market, with particularly strong brand performances in Brazil, China, France, Nigeria and Vietnam. Heineken® was also launched in Mexico and India, two attractive growth markets.

2011 also saw the successful completion of our TCM programme. We have now launched TCM2, a new 3-year €500 million cost saving programme. Our free operating cash flow was strong in 2011, exceeding €2 billion, and this will remain a core focus area going forward.

In the year ahead, we will continue to invest in our brands and global business capabilities across the Company. We will also invest in emerging markets to maintain our growth momentum. In Europe, we will continue to leverage our leadership position through our value growth strategy.”

2012 FULL YEAR OUTLOOKIn 2012, HEINEKEN expects to benefit from continued positive growth momentum in higher growth economies and from revenue enhancing initiatives in developed markets. In addition, revenue development will continue to be supported by an ongoing shift towards higher growth economies in Africa, Latin America and Asia.

The Heineken® brand is expected to continue its strong performance in the international premium segment. The ‘Open Your World’ campaign will be activated around the world. HEINEKEN will also invest in the expansion of its other global brands – Desperados, Strongbow Gold and Amstel – with further planned introductions in new markets in 2012. In addition, Sol, our Mexican global priority brand, will be launched internationally from 2012. HEINEKEN expects marketing and selling (beia) expense as a percentage of revenue to remain broadly in line with 2011 (12.8%).

HEINEKEN anticipates an approximate 6% increase in input costs per hectolitre, primarily reflecting higher pricing for malted barley. The Company expects to mitigate this impact through the implementation of planned revenue growth initiatives, as well as ongoing efficiency programmes.

Following the successful completion of TCM in 2011, HEINEKEN is introducing a new €500 million cost saving programme (TCM2) that will run from 2012 to 2014 across Supply Chain, Commerce, Wholesale and other functions. TCM2 is focused on driving operational cost efficiencies, and on leveraging HEINEKEN’s increasing global scale, primarily enabled through the Global Business Services (GBS) organisation formed in 2010. The initial scope of GBS will require an upfront investment of approximately €200 million through to the end of 2014, of which €32 million has already been incurred in 2011. These will be reported as part of the Company’s operating costs.

HEINEKEN has made strong progress on the realisation of its targeted €150 million cost synergies related to the acquired beer operations of FEMSA and expects to achieve this during 2012.

HEINEKEN expects a further organic decline in the number of employees in 2012.

HEINEKEN expects a slight increase in the effective tax rate (beia) in 2012 (2011: 26.8%) and forecasts a slightly higher average interest rate of around 5.5% (2011: 5.2%), primarily reflecting a movement in the currency mix of its debt.

Alongside ongoing business capability investments to leverage its global scale, HEINEKEN continues to focus on capital investment in higher growth markets. The Company plans to increase capital expenditure on property, plant and equipment to approximately €1.25 billion (2011: €800 million) reflecting investment in additional capacity and the renewal and expansion of its returnable bottle fleet in higher growth markets. As a consequence, HEINEKEN expects a cash conversion ratio below 100%.

Total dividend for 2011The Heineken N.V. stated dividend policy is a pay-out ratio of 30% to 35% of full-year net profit (beia). The payment of a total cash dividend of €0.83 per share of €1.60 nominal value for 2011 (total dividend 2010: €0.76) will be proposed to the annual meeting of shareholders. If approved, a final dividend of €0.53 per share will be paid on 2 May 2012, as an interim dividend of €0.30 per share was paid on 6 September 2011. The payment will be subject to a 15% Dutch withholding tax. The ex-final dividend date for Heineken N.V. shares will be 23 April 2012.