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Heineken targets margin growth in volatile 2017
February 15, 2017 / 6:38 AM / 7 months ago

Heineken targets margin growth in volatile 2017

FILE PHOTO - Packs of Heineken beer are displayed for sale in a Casino supermarket in Nice, France, January 16, 2017. REUTERS/Eric Gaillard/File Photo

BRUSSELS (Reuters) - Strong growth in Asia and Mexico led an increase in Heineken’s beer sales in 2016 as the world’s second-largest brewer edged above earnings expectations and forecast even better margins this year.

The Dutch maker of Europe’s top-selling lager Heineken, as well as brands including Tiger and Sol, sold 3 percent more beer last year, with the sharpest increase in Asia.

Sales also grew in France, Italy, Poland, Spain and Mexico, but fell in Nigeria, one of the group’s top four markets, as well as in the Democratic Republic of Congo and in Russia.

Chief Executive Jean-Francois van Boxmeer said margin expansion should be in line with the group’s target of 40 basis points, excluding major unforeseen economic and political developments and the impact of recent acquisitions in Brazil and Britain.

Some investors had felt it might struggle to reach its medium-term margin target this year after it achieved a 54 point improvement in 2016.

Heineken shares were up 4.0 percent at 0830 GMT, making them the strongest performers in the FTSEurofirst 300 index of leading European stocks.

“It’s a good set of numbers ... and margin expansion this year. You couldn’t really ask for better than that,” said Trevor Stirling, beverage analyst at Bernstein Research.

Heineken said it assumed a similar negative impact from currencies as last year, including a 1.1 billion euro (933.48 million pounds) hit on revenue. Chief Financial Officer Laurence Debroux said, for example, another devaluation of the Nigerian naira was likely later this year.

One further uncertainty would be the impact on Mexico, Heineken’s largest market, of U.S. President Donald Trump, who has talked about imposing duties on imports from its southern neighbour. Van Boxmeer said for the time being it was “not yet legislation”.

“How that all will pan out we don’t know. We are prepared for that. We’re going to surf the wave as it comes, but I think specifically for the tax situation, the NAFTA situation, this is a lot of speculation,” he told Reuters.

Heineken’s operating profit excluding one-offs rose by 9.9 percent on a like-for-like basis excluding currency movements and one-offs to 3.54 billion euros ($3.7 billion) last year. That compared with the 3.51 billion average forecast in a Reuters poll.

Heineken ranks as the world’s number two brewer, although the gap between it global leader AB InBev has widened after the latter’s near $100 billion takeover of SABMiller late last year.

Heineken has since committed some $1.4 billion to buy most of the pubs of Britain’s Punch Taverns and the Brazilian business of Japan’s Kirin.

($1 = 0.9454 euros)

Reporting By Philip Blenkinsop; editing by Robert-Jan Bartunek

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