Heineken N.V. Reports 18% Organic Net Profit Growth for 2009, Triples Free Operating Cash Flow

The international spread of our assets continues to be a competitive strength in the recession with all regions contributing to a strong 14% rise in organic EBIT growth.

23 Feb 2010 --- Heineken N.V. announced strong results for the full year 2009 18% organic Net profit growth, driven by higher revenue per hectolitre, and cost reductions, offsetting 5.4% organically lower Consolidated beer volume due to the global economic downturn; €1,741 million Free operating cash flow, versus €550 million in 2008. The cash conversion rate was 148%; €155 million pre-tax savings in the first year of the Total Cost Management (TCM) programme. Proposed total 2009 dividend of €0.65 per share; an increase of 4.8%, platform for future growth transformed via the planned acquisition of FEMSA Cerveza in Mexico, a new partnership with United Breweries in India and the completion of the Sedibeng Brewery in South Africa.

CEO comments

Jean-François van Boxmeer, Chairman of the Executive Board and CEO: “In one of the most challenging trading environments ever witnessed in our industry, we have delivered an outstanding financial performance, transformed our platform for future growth and built a more competitive business. 

The international spread of our assets continues to be a competitive strength in the recession with all regions contributing to a strong 14% rise in organic EBIT growth.

Strong pricing delivered stable revenues that compensated for lower volumes. Once again, the Heineken brand outperformed the total portfolio, proving its strategic value to our business.

The rigorous, company-wide focus on cash generation drove a more than 200% increase in our free operating cash flow and we made excellent progress in improving the profitability of our new markets, particularly in Russia, South Africa and the UK. TCM is on track with €155 million of costs taken out of the business in the first year of the TCM programme.

Our 2009 results clearly demonstrate the success of our strategy, the strength of our brands and the excellence and commitment of all our employees.

We have taken significant steps to transform and strengthen the future of our business. The intended acquisition of FEMSA Cerveza and our new partnership with United Breweries in India have increased our exposure to fast growing, developing markets. These agreements together with our new, fully operational brewery in South Africa will materially enhance the growth profile of Heineken.

Looking ahead, we will continue to invest in the growth of our brands, particularly Heineken. We will leverage our leadership in Europe and increase our marketing investments in order to grow value share. We will continue to deliver significant savings via our TCM programme, drive strong cash flow generation and ensure that our new markets will deliver further improvement in profit. We will work fast to complete the acquisition and integration of FEMSA Cerveza in order to unlock the synergies and potential of the combined business.“

Outlook for 2010

The global economic environment will continue to lead to lower beer consumption and down-trading in a number of regions in 2010.

Heineken is committed to utilising its global marketing excellence to build its key brands, including Heineken®, across all markets and to maintaining, or where possible improving, its price positioning. Price increases will be at levels well below those of 2009. However, Heineken aims to continue passing on excise duty increases through higher sales prices.

The Company will aim to improve both market and value share in its markets via increased brand investments.

Heineken will aggressively pursue its TCM cost reduction programme in all business areas and will continue to focus on improving the profitability of its newly acquired companies.

The likely fall in raw material costs per hectolitre due to a temporary decline in the price of brewing barley will be offset by higher energy costs, rising advertising rates and increased marketing costs.

Heineken reiterates its target of reducing its Net Debt/EBITDA (beia) ratio to below 2.5 times. Heineken is confident that it will achieve its target of a cash conversion rate in excess of 100% in the remaining two years of the Hunt-4-Cash-2 programme.

Capital expenditures related to property, plants and equipment will be broadly in line with 2009 at €700 million, and will be financed from cash flow. Heineken expects a further organic decline in the number of employees.

Excluding FEMSA Cerveza, Heineken expects an average interest rate of approximately 6% and an effective tax rate in the range of 25-27%.

Intended acquisition of FEMSA Cerveza

Heineken will acquire FEMSA Cerveza by issuing to FEMSA approximately 86 million new Heineken N.V. shares on closing of the deal with the commitment to deliver an additional 29 million Heineken N.V. shares over a period of not more than five years. Heineken intends to buy the 29 million existing shares in the market and finance the purchase from cash flow.

Heineken is preparing for the integration of FEMSA Cerveza, which will begin once the acquisition has been completed in the second quarter of 2010. As a result of the extensive insight gained into the business during the acquisition and due diligence process, combined with Heineken’s broad experience in the field, a rapid completion of this process is expected.

Dividend

The payment of a total cash dividend of €0.65 per share of €1.60 nominal value for 2009 (total dividend 2008: €0.62) will be proposed to the annual meeting of shareholders. If this is approved, a final dividend of €0.40 per share will be paid on 29 April 2010, as an interim dividend of €0.25 per share was paid on 2 September 2009. The payment will be subject to the 15% Dutch withholding tax. The ex-final dividend date for Heineken N.V. shares will be 26 April 2010.