Heineken, the renowned Dutch brewer, faced a challenging financial landscape in the first half of 2023 but remains steadfast in its strategic direction. On Monday, the corporation announced a significant allocation of its first-half savings towards marketing and sales initiatives, showcasing its commitment to brand development despite facing substantial headwinds.
The company reported an impairment of 874 million euros on its investment in China Resources Beer, leading to a notable loss of 95 million euros attributable to shareholders for the first half of the year ended June 30. This marked a sharp contrast to the impressive profit of 1.16 billion euros recorded during the same period last year. Despite these challenges, Heineken's underlying performance tells a more optimistic story.
When excluding exceptional items and the impact of a hefty amortization expense amounting to 1.3 billion euros, Heineken's net profit saw an organic growth of 4.4%, translating to 1.2 billion euros. Additionally, the operating profit increased by 12.5%, reaching 2.08 billion euros. However, these figures did not meet the consensus expectations set by RBC Capital Markets, which forecasted an operating profit of 2.15 billion euros. Revenue figures for the beverage giant also witnessed a modest uptick, growing to 17.82 billion euros from 17.44 billion euros a year earlier.
Nevertheless, its IFRS net revenue of 14.82 billion euros was below the anticipated 15.19 billion euros according to market analysts. Dolf Van Den Brink, Heineken's Chairman and CEO, expressed a sense of achievement regarding their first-half performance, highlighting the 6% organic growth in net revenue (beia) and the 12.5% increase in operating profit (beia).
Van Den Brink noted the strong performance in the Americas region, particularly in Brazil and Mexico, driven by a favorable portfolio mix and aggressive cost-saving strategies. Furthermore, the Asia-Pacific region (APAC) showed signs of recovery, primarily supported by growth in India, while the Vietnamese beer market appears to be stabilizing.
In Africa, Heineken is actively working through the volatility, and in Europe, the company managed to increase market share across most of its territories despite the adverse weather conditions that impacted beer consumption in June. However, analysts at RBC have indicated that the overall results were less than stellar, with the majority of the profit and loss statements failing to meet the expectations set by the company.
They recommended that Heineken should significantly increase its investments, especially considering the premium nature of its product portfolio and the expected price increases relative to competitors. Looking ahead, Heineken provided revised guidance for its full-year 2024 outlook. The company increased the projected growth range for organic operating profit, exceptional items, and amortization from its earlier forecast of low to high single-digit growth to a range of 4% to 8%.
Analysts from Bernstein view this as a cautious outlook since the company-compiled consensus already sits at the upper bound of this range, at 8.2%. Additionally, Heineken adjusted its tax guidance down to 28% from 29% and anticipated an organic net profit (beia) growth to align with the expected operating profit (beia) growth. In the first half of the year, Heineken successfully generated 300 million euros in gross savings, positioning itself on track to achieve total savings of 500 million euros by year-end.
This initiative exceeds their medium-term commitment of maintaining an annual savings rate of 400 million euros. Importantly, a significant portion of these savings is set to be reinvested into brands across key markets, including Mexico, Brazil, Vietnam, India, and South Africa. As a final note, Heineken's stock price was reported at $84.92, reflecting a decrease of $5.78 or a percentage change of -6.37%.
This dip signals the market's cautious approach following the company's latest updates..