Heineken dampens profit guidance as currency pressure squeezes margins | City A.M.
Heineken cut its profit guidance this morning as earnings fell below market expectations.
Shares in the company dropped 5.2 per cent in early trading.
The figures
The brewer reported earnings per share of €1.89 (£1.68) in the first half, lower than consensus estimates of €1.96.
Margins were also dampened, declining by 118 basis points. Excluding the cost of consolidating the Brasil Kirin business in Brazil, margins fell 76 basis points.
As a result, Heineken adjusted forecasts for the year, saying margins would decline by 20 basis points rather than increase by 25 points as previously expected.
But revenue was up 5.6 per cent, with overall beer volumes growing 4.5 per cent and volumes of the flagship Heineken brand up 7.5 per cent.
Read more: Brits spent £135m on craft beer in the last 12 months
Why it’s interesting
Foreign exchange rates put pressure on margins in several of Heineken’s markets, while the expansion of the Brazilian business has proved to be dilutive. Its acquisition of the Brazilian operations of Japan’s Kirin has weighed on profitability, but also made it the number two player in the market.
Looking ahead, the company said it expects the market to remain volatile and for currency to have a negatve effect.
Meanwhile, the growth in volumes has been given a boost by the high level of innovation in the current beer market. Low and no alcohol beer volumes, craft beer and cider were all areas of volume growth.
Last month Heineken made another move into the UK’s thriving craft beer scene with the acquisition of a stake in Beavertown.
What Heineken said
Chairman and CEO Jean-Francois van Boxmeer said: “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. “
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