Heineken reports 5.4% organic net profit growth for the first half of 2005, in line with expectations

 

 

The result of Heineken Holding N.V.'s participating interest in Heineken N.V. for the first half of 2005 turned out at €173 million[3].

Heineken achieved organic growth in all key metrics in the first six months of 2005: 1.3% in turnover, 3.6% in EBIT and 5.4% in net profit, in line with Heineken's outlook statement published on 22 February 2005.

 

Reported net profit of Heineken N.V. decreased to €345 million due to exceptional charges and weaker currencies against the euro. Net profit (beia) of Heineken N.V. increased €9 million, or 2.5% to €371 million, despite a negative currency effect of  €15 million.

 

Group volume[4] grew by 3.3% (from 54.4 million hectolitres to 56.2 million hectolitres).

 

Sales of Heineken beer in the premium segment grew by 3% to 9.7 million hectolitres, further confirming its position as the world's leading international beer brand.

 

In the USA, sales volume excluding distribution of the Femsa brands, decreased by 2.5%. However, depletions - sales by distributors to the retail-trade - were down only marginally (-0.4%). Heineken Premium Light Lager has been introduced into test-markets, and the national roll out is expected to take place in the first half of 2006.

 

Heineken introduced a number of innovations and launched new marketing programmes such as the Draught Keg, Heineken Premium Light Lager in test-markets in the USA, and the sponsorship of the European Champions League for the Heineken brand. These investments are aimed at strengthening the Heineken brand and meeting the challenges of changing consumer dynamics in Western Europe and the USA. These programmes are part of the €100 million additional investments in innovation and marketing announced in February 2005.

 

Russia became Heineken's largest market by volume and Heineken strengthened its number three position by four additional strategic acquisitions.

 

Efficiency improvement programmes across the business continue to deliver cost savings. The €35 million cost reduction programme in the Netherlands was successfully completed and in Central and Eastern Europe, Heineken achieved recurring annualised synergies of €40 million in the first half of 2005 (€26 million at the end of 2004). Exceptional reorganisation charges of  €34 million have been taken in the first part of 2005. These related to the implementation of the programme to further reduce costs by at least €50 million in Western Europe, and the new top management structure announced in April 2005.

 

Strong operating cash flow was achieved close to the figure for the same period  last year, reflecting the continued focus on rigorous cash management. The disposal of non-core assets, mainly the real estate assets acquired with the BBAG business, contributed a further €260 million to the net cash flow.

 

 

 

Heineken reiterates its full-year profit outlook for 2005. The company expects organic growth in net profit that will not exceed mid-single digits for the full year. As already stated in February, the negative impact of foreign currencies, particularly relating to the US dollar, is expected to outweigh the predicted organic net profit growth and positive net contributions from new acquisitions.

 

Heineken will continue to increase the efficiency of the company and expects to take additional exceptional charges in the second half of the year, currently estimated at about €70 million before tax. This relates to efficiency improvements linked to the new brewery that is under construction in Seville, Spain.  This item will not impact the organic net profit growth of the business for the second half of 2005 as it will be reported as an exceptional item.

 

 

According to the articles of association of Heineken Holding N.V. both Heineken Holding and Heineken N.V. pay an identical dividend. An interim dividend of €0.16 per share of €1.60 nominal value will be paid on 21 September 2005. Heineken Holding N.V. shares will be quoted ex dividend from 8 September 2005.