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Heineken Expects Further Organic Revenue and Profit Growth in 2017

Heineken Expects Further Organic Revenue and Profit Growth in 2017

Heineken has reported a 1.4% increase in revenue to €20.792 billion with net profit (beia) up by €50 million to €2.098 billion, an organic increase of 8.5%, for its 2016 financial year. Currency developments had a negative impact of 5.6% (€1.150 billion) on revenue, largely driven by the depreciation of the Mexican Peso, the Nigerian Naira and the British pound. Revenue increased 4.8% organically, with a 2.6% increase in total volume and a 2.2% increase in revenue per hectolitre.

Operating profit (beia) was €3.540 billion, up 9.9% organically, with a €216 million negative foreign currency impact and €40 million increase from consolidation changes. Operating margin improved by 54 bps to 17.0%. Higher revenue and the benefit of realised cost savings and efficiencies were only partially offset by higher marketing and selling expenses.

After a strong first half, operating profit (beia) growth slowed in the second half reflecting tougher comparatives, increased currency headwinds as well as further challenging economic conditions in some developing markets. In the full year, strong performance in Americas, Europe and Asia Pacific more than offset weaker performance in Africa, Middle East & Eastern Europe where both the difficult economic backdrop and currency pressure adversely impacted results.

Heineken is continuing to invest in key developing markets and in 2016 entered new countries including Ivory Coast and the Philippines, and expanded production capacity in China, Vietnam, Ethiopia and Cambodia.

Jean-François van Boxmeer, chief executive and chairman of Heineken.

Jean-François van Boxmeer, chairman and chief executive of Heineken, comments: “We delivered strong results in 2016, with clear outperformance of our premium brand portfolio led by Heineken®, and sustained momentum from our innovation agenda. Our unique diversified footprint was again a competitive advantage, enabling us to deliver more than 50 basis points margin expansion, despite more challenging economic conditions in some developing markets and significant currency pressures.”

He adds: “Performance in key European markets was good and results in Vietnam and Mexico were strong. In Africa, Middle East & Eastern Europe market conditions remained tough, most notably in Nigeria, DRC and Russia.”

Economic conditions are likely to remain volatile in 2017 with a negative impact from currency comparable to 2016. However, the global brewer expects further organic revenue and profit growth in 2017.

Excluding major unforeseen macro economic and political developments as well as the impact of the proposed acquisitions of Brasil Kirin from Kirin Holdings of Japan for €664 million in Brazil, and Punch, the leased pub company for £403 million, in the UK, Heineken expects continued margin expansion in 2017 in line with the medium term margin guidance of a year-on-year improvement in operating profit (beia) margin of around 40 bps.

Capital expenditure related to property, plant and equipment should be slightly below €2 billion compared with €1.8 billion in 2016.

Europe

In Europe, Heineken increased beer volume by 0.7% driven by strong growth in the premium portfolio, led by the Heineken brand. France, Serbia, Spain, Italy and Poland contributed positively and more than offset the decline in Romania. Beer volume in the fourth quarter declined 2.5%, largely due to a deliberate reduction in promotions and private label volume in some markets as well as a strong comparative in December 2015.

European revenue at €10.11 billion increased by 1.9% organically, with revenue per hectolitre up 1.4%. Deflationary pressure and off trade pricing pressure continued to impact the region.

Operating profit (beia) at €1.26 billion was up 7.1% organically due to successful revenue management, continued focus on premiumisation and innovation, as well as disciplined cost management. Operating profit (beia) margin rose 80 bps to 12.5%.

In the UK, beer volume declined slightly, although premium beer and cider volume increased strongly, led by the Heineken brand. Cider innovations were successful and value enhancing. The pubs business continued to perform well.

In France, volume grew mid single digit, with growth led by premium brands including Heineken, Desperados and Affligem. However, the pricing environment continues to remain challenging.

In Spain, beer volume was up low single digit, with double digit premium segment growth supported by continued improvement in the underlying economic environment and good on trade performance.

In the Netherlands, volume grew low single digit, led by Heineken and supported by strong performance of Brand and Affligem in the premium segment.

In Poland, beer volume increased low single digit. The underlying market continued to be adversely impacted by channel mix and competitive pricing strategy.

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