Heineken has predicted a fall in profitability for the year as it expands more quickly than expected in Brazil, where its business is less profitable.
The brewer of brands such as Tecate, Amstel and Tiger forecast that its operating margin would decline by 20 basis points for the full year as it publishes its half-year results today.
Last year Heineken acquired Kirin’s struggling Brazilian business in a deal worth €665 million, making it the second largest beer company in the country. Heineken said that the marked acceleration of its combined operations in Brazil with an operating margin below group average “plays negatively on the mix”.
In total, Heineken posted a 4.2% growth in net revenue in the first half of the year to €10.78 billion, with turnover soaring by 12.2% in Africa, Middle East and Eastern Europe.
Net profit was up 9.1% to €950 million with sales volumes for the Heineken beer brand increasing 7.5%, with “positive momentum in all regions”.
The company’s craft and variety unit was up double digit, supported by the performance of local craft propositions as well as from international craft brands such as Lagunitas, which Heineken fully acquired last year. Last month, the firm further expanded its craft portfolio, buying a minority stake in the UK’s Beavertown Brewery.
Heineken CEO Jean-François van Boxmeer
In Europe, the company’s largest area by sales, revenue was up 1.1%, with beer volume “broadly stable”. In the UK, volume declined low single digit. Good early summer weather helped to partially offset the impact of the cold weather in the first quarter and CO2 shortage in June
Heineken CEO Jean-François van Boxmeer said: “Top line came in strong in the first half, with organic net revenue growth across all regions. Europe was back to growth in the second quarter whilst the other regions maintained their positive momentum. The Heineken brand grew strongly by 7.5%. Operating profit margin was lower than last year mainly due to the consolidation of Brasil Kirin, adverse currency effects and higher input costs.
“In the second half, we expect a continuation of our revenue growth and an acceleration of our operating profit growth on an organic basis. We continue to invest steadily behind our brands, innovations, e-commerce platforms and commercial strategy. For the full year, given the marked acceleration of our business in Brazil with margins still below group average and the negative impact from currencies, we now expect the operating profit margin to decrease by approximately 20 bps.”
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