Heineken Net Profits Up 20% in H1

Van Boxmeer: “The integration of Scottish & Newcastle and our other newly acquired businesses is now completed. There are clear signs that our specific plans to improve profitability in each of these businesses and to strengthen our long-term market position in the UK are bearing fruit.”

26 Aug 2009 --- Heineken N.V. has announced strong organic net profit (beia) growth of 12%, despite lower volumes, driven by robust pricing and cost reductions. Net profit (beia) amounted to EUR483 million, diluted by financing costs related to acquisitions. Net profit was 20% higher at EUR489 million due to organic growth and an exceptional gain on the purchase of Globe notes and bank debt;

The company announced that its UK performance was encouraging driven by market share gains, sound pricing and cost reductions. There were EUR50 million of cost savings from Total Cost Management programme; which equates to annualised savings of EUR120 million.

Jean-François van Boxmeer, Chairman of the Executive Board and CEO, commented: “This has been a strong first half performance, confirming that our value strategy is delivering results. The strength of our brand portfolio has enabled us to support our margins, achieving a stable top line performance despite lower volumes.”

“Our rigorous Total Cost Management programme is delivering early results, with annualised savings of EUR120 million achieved. We see substantial opportunity to drive down our cost base in the second half of the year and beyond. Focused actions by our management teams to improve profitability, reduce capital expenditure and control working capital has improved our free operating cash flow by more than EUR500 million.”

“We continue to prioritise investments where we see opportunity to grow the value of our operations. This is demonstrated by double-digit revenue and EBIT (beia) growth in our African region and the organic profit growth in Western Europe. We have maintained the price positioning of our brands with the Heineken brand outperforming the overall portfolio.”

“The integration of Scottish & Newcastle and our other newly acquired businesses is now completed. There are clear signs that our specific plans to improve profitability in each of these businesses and to strengthen our long-term market position in the UK are bearing fruit.”

“The economic and trading conditions remain difficult, and there will be continued pressure on volumes in the second half of 2009. However, our focus on brand building, prioritised investment and rigorous cost reduction will continue to deliver value in the second half of the year.”

Heineken said it remains cautious on the development of global beer consumption and expects year-on-year volume declines in many markets in the second half of 2009 as a result of rising unemployment and lower disposable incomes. However, Heineken expects the rate of decline to ease towards the end of 2009 due to less demanding comparisons. The Africa and Middle East region is expected to continue to perform well albeit at a lower growth rate than in the first half of the year.

Heineken will continue its focus on brand building, cash flow generation, debt reduction, cost reduction, and improving the performance of newly acquired companies. The company will maintain the price position of its key brands. All main brands will be supported by the appropriate level of marketing investments. Better pricing will continue to have a positive effect, although the impact will be less than in the first half of 2009. In markets with high inflation or margin deterioration, the company will aim to maintain its pricing position in the second half of the year.  For the second half, Heineken expects the negative currency impact on results, especially of the US dollar, Nigerian naira and Polish zloty, to be larger. The Total Cost Management programme will continue to deliver cost savings in the second half of the year, which will help to drive margins. As a result of the above, Heineken expects organic net profit (beia) growth for the full year of 2009 to be at least high single-digit.