UPDATE: HOLLAND: Heineken brand boom drives brewer
Heineken chief Jean-François van Boxmeer said today (21 February) that the brewer would look to make additional cost savings of some EUR90m (US$118m) over the next two years to offset inflation.
Van Boxmeer, the Dutch brewing giant's chairman and CEO, was speaking as the brewer reported an 11% rise in underlying profits for 2006.
The brewer saw operating profit rise 10.7% on an organic basis to EUR1.6bn (US$2.1bn) as the Heineken brand enjoyed its biggest growth since the 1980s. Revenues rose 7.1% to EUR11.8bn as sales of the Heineken brand grew by almost 12%.
However, van Boxmeer said Heineken had identified a further round of cost cuts to offset rising inflation. Heineken is targeting net savings of EUR200m by the end of 2008 under its "Fit2Fight" programme.
To compensate for a spike in inflation, van Boxmeer said Heineken would increase its gross cost savings from EUR360m to EUR450m.
"We are comfortable that we are now able to deliver a portfolio of savings projects amounting to EUR450m, making up still the EUR200m of net savings," van Boxmeer said. He declined to outline where Heineken would look to cut costs throughout its business but said the brewer would "basically" look to cut costs in the areas where savings had already been generated.
In the last year, Heineken has focused much of its cost cuts on Europe. The company has, for instance, restructured its wholesale operations in France, closed a bottling site in Italy and closed breweries in Slovakia and Poland. These moves, among others, led Heineken to deliver savings of EUR114m before tax last year.
Looking at the company's robust sales performance, the successful US launch of Heineken Premium Lightdrove sales of the core Heineken brand and added some 680,000 hl to the brand's volumes. The brewer believes US sales of Heineken Premium Light will reach 1m hl this year.
Van Boxmeer admitted, however, that the success of Heineken Premium Light in the US had cannibalised the sales of stablemate Amstel Light, which saw sales fall by almost 10%.
Nevertheless, van Boxmeer insisted that Heineken would look to rejuvenate the Amstel Light brand in the US. "Amstel Light is under pressure but in no way do we have the intention of abandoning the brand."
Good weather in the second half of last year helped boost Heineken's sales in Western Europe by 2.4%, as volumes rose in the UK, Spain, Ireland and Switzerland.
In Russia, Heineken said it had completed the integration of its ten breweries ahead of schedule. The brewer saw volumes in Russia reach 13m hl, a jump of some 10%.
Heineken's net profit leapt 59.1% to EUR1.2bn, boosted by gains worth EUR291m from a series of one-off items. Stripping out those gains, net profit rose 12.6% on an organic basis to EUR930m.
Heineken said it expects net profit to rise by 10-13% on an organic basis in 2007.
The global market for premium beer is set for further strong growth over the coming six years, according to a recent report published by just-drinks, but there will be marked variations in the growth ...
Heineken has launched a campaign to help publicans make the most of sales opportunities in the UK during this year's Rugby World Cup....
Heineken has prepared an addition to its off-trade draught beer system in the US....
Asia Pacific Breweries has seen its investments in new breweries take a chunk out of its third quarter profits....
Heineken has been given the all-clear to acquire Krusovice Brewery in the Czech Republic....
Asia Pacific Breweries has announced some changes to its senior management team....
Compania Cervecerias Unidas has posted an impressive leap in operating and net profit in the year so far....
InBev and SABMiller have had their share coverage raised....
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