just On Call - Brand Heineken buoyant in H1
Heineken's management was in upbeat mood today after reporting success for the company's namesake brand in emerging markets, the completion of the FEMSA Cerveza deal and progress on cost savings in the first half of 2010.
Heineken brand sales rose by 4% in volume for the six months to the end of June, compared to the same period last year. The rise was predominantly driven by a double-digit increase in Asia, while the beer suffered alongside the group's other brands in sluggish European markets.
Still, the Heineken brand performance was one of several positives that the group's management were able to draw on in the firm's results statement today (25 August).
The group said that integration of FEMSA Cerveza in Mexico, which it bought earlier this year, remains on-track. It said that the Mexican beer business reported slight rises in sales and profits since May, when it officially became a part of the Heineken group.
Heineken also highlighted progress made on cost savings as part of its Total Cost Management programme, which is now at the halfway point of its three-year term. The firm achieved EUR104m (US$131.5m) in savings for the half-year, bringing total savings to EUR259m since January 2009.
Part of the savings strategy has been to scale back and consolidate operations across Europe in order to reflect falling demand for beer. "The majority of the savings are coming from Europe," Heineken's CFO, René Hooft Graafland, told analysts today.
He said that the company closed four breweries during the half-year: two in the UK, one in Czech and one in Romania. However, a strong proportion of savings also came from improved wholesale arrangements and efficiency gains in day-to-day business.
There remained holes in Heineken's results, in particular weak demand for beer in Europe. The firm lost market share in the UK after refusing to participate in discount deals during the FIFA World Cup, while it was also the worst-hit of all the major brewers in Russia.
Analysts and investors reacted largely positively to the results today. Heineken's share price was broadly level after its half-year statement was released and the company said that it expects organic net profits growth in low double-digits.
"We believe that Heineken's H1 represents a positive set of results, despite quite a lot of noise at a regional basis," said analyst group Sanford C Bernstein.
Heineken's chairman and CEO, Jean-François van Boxmeer, sought to reassure investors on Russia's recent decision to ban wheat exports. He said that the company "does not expect a major spike" in grain prices.
Asia Pacific Breweries has posted a healthy lift in Q1 sales and profits, driven in part by acquisitions....
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