Heineken doubles profit, warns on costs

Heineken doubles profit, warns on costs

by Joseph Anthony
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Dutch brewing giant Heineken expects the COVID-19 pandemic to weigh on key Asian markets for the rest of the year and rising costs to dent margins, it said after posting a better than expected doubling of first-half earnings on Monday

Chief Executive Dolf van den Brink, who has been at the helm of the worldโ€™s second-largest brewer for a year, said the company was pleased with the strong first half, but expressed caution, with results expected to remain below pre-pandemic levels in 2021 as a whole.
โ€œUnlike last year, we now see significant impact on the business in southeast Asia,โ€ Van den Brink told Reuters in a telephone interview on Monday, referring to the fallout from the COVID-19 pandemic.
He said Vietnam, a top three market for Heineken, was a concern, with lockdowns imposed in its strongholds in cities and the south of the country. Elsewhere, the companyโ€™s Malaysia brewery is shut and reduced tourism is hitting Indonesian sales.
The maker of Europeโ€™s top-selling lager Heineken, Tiger and Sol, previously forecast an improvement in market conditions in the second half of 2021, depending on vaccine roll-outs.
Rising commodity costs, including for barley, sugar and aluminium for cans, would start affecting Heineken in the second half of 2021 and would have a โ€œmaterial effectโ€ in 2022, when hedging contracts were no longer mitigating the increases.
Marketing expenses would also be skewed towards the second half as bars reopened.
Anheuser-Busch InBev (ABI.BR), the worldโ€™s largest brewer, last week reported a surge in beer sales in the second quarter, but higher can and transport costs curbed profits. read more
Heineken sold almost 10% more beer in the first half than a year ago and Van den Brink said the company would seek to be โ€œassertiveโ€ on pricing, having achieved nearly 10% higher prices per hectolitre of beer in the Americas and Africa/Middle East in the first half.
Its shares rose almost 2% in early trading before giving up most of the gains to stand 0.5% higher at 98.74 euros by 0830 GMT.
Trevor Stirling, beverage analyst at Bernstein said he expected consensus earnings estimates for this year to rise.
โ€œThe inflationary environment will be much higher next year. How much can they recover in pricing?โ€
The company said more than half of the savings under its three-year plan to save 2 billion euros and restore profit margins to pre-pandemic levels by 2023, partly through cutting 8,000 jobs, should be achieved by the end of 2021. read more
First-half operating profit before one-offs doubled to 1.63 billion euros ($1.93 billion), compared with the average forecast in a company-compiled poll of 1.22 billion euros.
REUTERS

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