Heineken profit lifts as it continues to grow worldwide

Heineken4Dutch beer giant Heineken posted a 9.9 per cent rise in annual earnings prior to the planned takeover of the British pub Punch Taverns.

The deal between Heineken and Punch Taverns with private equity firm Patron Capital was made last December.

According to reports, the business is valued at $A653.6 million.

Heineken is set to acquire 1,895 pubs and Patron 1,329. The deal is expected to go through by the end of the first half of 2017.

Heineken posted underlying operating profit of 3.54 billion euros ($A4.9 billion) last year, up from 3.38 billion euros and said it sold three per cent more beer by volume. It revealed a 1.15 billion euro hit to revenues from the Brexit-hit pound, as well as currency depreciation in other markets, although turnover still rose by 1.4 per cent to 20.8 billion euros.

The Dutch beer giant said it is set for further sales and profit growth ahead but is wary of the “volatile” economic conditions and expects an increase in currency impact of up to 75 million euros.

“Heineken transformed its geographic profile between 2009 and 2015. In 2009, Western and Eastern Europe jointly accounted for 73 per cent of the company’s global alcoholic drinks volumes. By the end of the review period, this figure had fallen to 47 per cent,” commented Anna Ward, analyst at Euromonitor International.

“While Western Europe remained Heineken’s largest regional market in 2015, it was responsible for only 28 per cent of the company’s alcoholic drinks volumes. Meanwhile, Australasia was the only regional market in which Heineken registered alcoholic drinks volumes of less than two billion litres.”

Heineken said beer sales by volume declined “slightly” in the UK last year, but premium sales saw double-digit growth.

The Dutch beer giant also significantly expanded its presence in Asia Pacific through acquisition. Ward saw the region as a primary target for Heineken as the brewery is the eight biggest alcohol manufacturer in the region. While it ranks first or second place in individual markets it operates in.

Heineken signed a joint venture with Asia Brewery Incorporated in the Philippines last year. It shows its strategy across Asia Pacific. She further explained large acquisitions are few and the best route for company growth is to acquire a smaller or agree to a joint venture.

“Asia Pacific is a key focus for Heineken, with a number of its main markets set to see considerable growth over the forecast period — albeit starting from fairly low bases,” Ward said.

“It has over 40 per cent beer market share in Indonesia, Malaysia and Singapore. Volumes across many markets are dominated by mid-priced and premium lager, fitting well with Heineken’s global premium focus.”

Global sales of Heineken in the premium market also rose 3.7 per cent by volume attributed to the double-digit growth across Brazil, South Africa, Mexico and Romania.

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