Heineken shares drop on near-£750m China impairment charge
Heineken has taken a €874m (737m) impairment charge on its investment in China’s largest brewer, leading it into the red and causing shares to drop by seven per cent in early trades.
The impairment charge led to a first-half net loss of €95m (£80m) for the brewer, down from profit of €1.1bn (£930m) in the first half of 2023.
The beer-maker, which also owns brands Tiger and Sol, said it had written down the value of its 40 per cent stake in China Resources after the company’s share price plunged below the price Heineken paid for its sale.
China Resources’ decline was driven by “concerns on the macroeconomic environment in China” and a “negative view on consumer goods companies seen as more exposed to soft consumer demand”, Heineken said.
Alongside the impairment announcement, the brewer, which is listed on Euronext in Amsterdam also announced its half-year results.
Half-year operating profit growth came in at 12.5 per cent, below estimates. Revenue increased by 2.2 per cent to €17.8bn.
The volume of beer sold rose by 2.1 per cent, below analysts’ forecasts of 3.4 per cent. Heineken blamed poor June weather for the dip after an anticipated summer boost failed to materialise.
The brewer expects to deliver operating growth of 4-8 per cent for the full year 2024, a downgrade from its previous forecast of low to high single-digit growth.
It also plans to ramp up investment in sales and marketing in a bid to make the most of “oppertunties for long-term sustainable growth”, the company said. It will particularly focus on Mexico, Brazil, Vietnam, India and South Africa.
“The company benefits from having brand strength and that matters in a highly competitive market,” AJ Bell analyst Dan Coatsworth said.
“What’s still uncertain is consumers’ capacity to spend big on discretionary items while interest rates stay high… while lots of people might enjoy a beer or two, they may have no choice but to cut back on these little luxuries if they remain under financial pressure,” he added.