NETHERLANDS: Heineken in no rush to sell brewery sites
Heineken holds on to brewery sites
A fall in property prices linked to the global economic crisis has held up Heineken's efforts to raise cash by selling brewery sites.
Heineken CFO Rene Hooft Graafland told analysts yesterday (22 April) that the sale of sites is effectively on hold until commercial property markets recover.
Heineken has either closed, or announced the closure of, several breweries across Europe in the past 12 months as part of its three-year Total Cost Management scheme.
"The timing for selling these sites is not easy at this moment, so don't expect big things on the short-term," said Hooft Graafland, when questioned on whether Heineken planned to use brewery site sales to boost cashflow in 2010.
"We are not prepared to sell these sites off at fire sales prices," he said, in a conference call on the group's first quarter results.
Heineken closed breweries in Romania and Finland in the first three months of 2010, while the firm has announced the closure of the Louny brewery in Czech Republic, the Fischer brewery in France and the Dunston brewery in the UK. Last year, it also announced the closure of several breweries in Russia, including the Stepan Razin brewery in St Petersburg.
"We have quite some properties for sale," said Hooft Graafland.
The sale of disused brewery sites could have helped Heineken in its cashflow generation scheme, Hunt for Cash Two, which alongside cost savings is a key part of the firm's strategy to cut debt in 2010.
But, commercial property prices sank in many countries during the global economic downturn and have yet to fully recover.
Global transactions in real estate fell to US$209bn in 2009, down 45% on 2008, according to a report last month from global property agency Jones Lang LaSalle.
"The increase in global transaction volumes that occurred in the second-half of 2009 in all regions is an encouraging sign, although full year volumes were below 2003 levels so there is still a long road ahead,” said Arthur de Haast, head of the firm’s International Capital Group.
Heineken is not the only brewer to have put the sale of disused sites on hold. In Ireland, Diageo has suspended a planned restructuring of brewing operations that would have involved the sale of its sites at Kilkenny and Dundalk.
Despite the pressure in this area, Heineken said yesterday that it remains confident on generating cash in 2010.
It reiterated its commitment to achieve an operating cash conversion rate of more than 100% for 2010 and 2011. The group also plans to cut its net debt to EBITDA ratio to below 2.5 times, compared to 2.6 times at the end of 2009.
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