Heineken Net Profit Up 20% in 2007

20/02/08 Heineken N.V. has announced 23% organic growth in net profit for the twelve months to end December 2007. This performance is in line with the Company’s forecast published in August 2007.

Net profit (beia) for 2007 amounted to EUR 1,119 million with EBIT (beia) growing 20% organically to EUR 1,846 million. Once again, the Company was able to drive growth in all key metrics across virtually all regions.

At the Annual General Meeting of shareholders in April 2008, Heineken will propose a 17% increase in dividend for 2007 to EUR 0.70 per share (2006: EUR 0.60).

For 2008, Heineken expects another year of positive organic net profit growth driven by the shift towards premium beer, strong consumer demand for its brands, improved pricing and a continued focus on cost control.

Net Profit (beia) increased organically by 22.6%, driven by the 20% organic increase in EBIT (beia). Reported Net Profit was 33% lower, reflecting EUR 301 million of net exceptional charges, compared with EUR 291 million of net exceptional gains in 2006.

Revenue grew 6.2%. Organic growth in revenue was 7.3%, driven by strong organic volume growth and a positive price and sales mix. Foreign currency fluctuations had a negative effect on revenue. Consolidated beer volume grew 7.1% to 119.8 million hectolitres of which 6.5% was organic growth and 0.6% was attributable to the first-time consolidation of newly acquired companies. Group beer volume grew 5.5% to 139.2 million hectolitres.

Volume of the Heineken brand in the international premium segment grew 10% to 24.7 million hectolitres, increasing share in the global segment. Volume increased substantially in all regions.

Innovation in draught beer systems contributed more than 1.2 million hectolitres to the increase of the volume of the Heineken brand and other brands, and an improvement in the sales mix. DraughtKeg sold more than 10 million 5-litre kegs.

The F2F fixed cost ratio improved further to 30.7% from 33.1% in 2006. In 2007, Heineken delivered additional gross cost savings of EUR191 million, which is ahead of plan, achieving 68% of the forecast 3-year plan cumulative amount.

Jean-François van Boxmeer, CEO of Heineken commented: “2007 was an outstanding year. We executed our plans quicker, with high impact and focus on performance and delivery of our key priorities. 

“In doing so, we grew organic net profit by 23%; we grew revenues by more than 7%, volumes by more than 6% and the Heineken brand by 10%; we delivered EUR191 million of annual gross cost savings as promised; we achieved this with a leaner organisation and a more accountable decision making culture.  Through our anticipated acquisition of Scottish and Newcastle, we will strengthen our global position, reinforce our European leadership and acquire strong platforms for further profitable growth.

“In 2008 we will focus on realising the opportunities that we have created and on delivering another year of positive growth. I am fully confident that despite the challenges of rising input costs and the uncertain economic outlook in some regions we will again be strong and competitive enough to deliver positive profit growth.”

Heineken expects 2008 to be another year of positive organic growth in net profit, based on a further improvement in sales mix, better prices, higher beer volumes and savings in fixed costs. The international premium segment will continue to grow at a higher rate than that of the overall beer market and the Heineken brand will benefit from this trend. In its third and final year, the Fit 2 Fight cost savings programme is expected to deliver approximately EUR 150 million of gross costs savings, delivering in full the F2F programme launched at the beginning of 2006.

As a result of worldwide input cost inflation, Heineken expects a 15% price increase in its raw material and packaging costs. The Company expects that it will be able to fully pass on the impact of the increased input and energy costs in most of its markets. Due to the uncertainties around the possible impact of worldwide consumer price inflation and the effect of weakening economies on consumer spending and beer consumption, it is too early to make a reliable estimate of volume levels for 2008.

Heineken expects capital expenditure related to property, plant and equipment to total approximately EUR1.2 billion in 2008. Part of this investment is related to capacity expansion and the construction of new breweries in Central & Eastern Europe, Asia and Africa. Capital expenditures will be financed mainly from cash flow.

The total restructuring costs associated with the Fit 2 Fight saving programme is expected to amount to approximately EUR 225 million, of which an estimated EUR 75 million will relate to 2008. As a result of cost-reduction programmes, the underlying downward trend in the number of employees will continue.

In the event of a successful offer for Scottish & Newcastle, Heineken’s share of the assets will be consolidated for the first-time when the transaction becomes effective.