Heineken Reports 41 Percent Rise in Full Year Profits

Heineken expects volume development in Latin America, Africa and Asia to benefit from ongoing robust economic conditions and marketing and investment programmes.

2/16/2011 --- Heineken N.V. has reported that net profit was up 41% to €1,436 million in 2010 partly due to changes in consolidation scope. Organic EBIT (beia) growth of 8.6% was reported as cost saving initiatives, improved pricing and sales mix and higher profit from Heineken’s joint ventures exceeded the effect of lower volume and revenue. The Heineken brand premium had volume growth of 3.4%, further strengthening its position as the world’s leading international premium beer.

Jean François van Boxmeer, Chairman of the Executive Board and CEO, commented: “Heineken delivered a robust performance, generating double-digit organic net profit growth for the fifth consecutive year. We achieved this against a backdrop of an improving yet still challenging economic environment in a number of our key markets. At the same time, we have made significant investments in our platform for future growth. The most transformational event being the acquisition of the beer operations of FEMSA which provide us with significant new opportunities in three of the four largest profit pools in the global beer market: Mexico, Brazil and the USA.“

"I am particularly pleased that the Heineken brand has once again outperformed our broader brand portfolio, the overall beer market and the international premium segment as a whole. We will continue to invest in our leadership position in this segment.“

"In addition to the acquisition of the beer operations of FEMSA, our new partnership in India and strong growth in Africa and Asia have further enhanced our exposure to emerging beer markets. At the same time we have a clear plan of action for addressing the challenging market and consumer dynamics that exist in Europe and the USA, focusing our efforts on delivering value growth through increased investments in existing and new higher margin brands such as Dos Equis, Desperados and Strongbow. Over time, this is expected to deliver volume and value share growth.“

"Our success in 2010 was also built upon the significant progress made with our TCM cost saving programme and cash flow generation, enabling us to achieve our long-term Net debt/ EBITDA target ahead of plan. The relentless focus on cost reduction, global synergies and cash flow generation will continue in 2011 and beyond.“

I am confident that all these initiatives will provide an excellent platform for revenue and profit growth in the years ahead.”

Heineken expects volume development in Latin America, Africa and Asia to benefit from ongoing robust economic conditions and marketing and investment programmes. Although the Company expects an improving economic environment in Europe and the USA in 2011, the impact of austerity measures and high unemployment is expected to result in continued cautious consumer behaviour in these markets. The international premium segment will continue outgrowing the overall beer market, benefiting the Heineken brand and supporting improved sales mix. Heineken forecasts a low-single digit increase in input costs and plans to mitigate this impact through increased pricing.

In Europe, Heineken will shift its prime focus towards volume and value share growth, with increased investments in marketing and innovation in Heineken and other key brands, further supported by the international roll-out of higher margin brands. Whilst this is expected to affect profit development in Europe in the near term, it underlines our commitment to strengthening our leadership position in the region. In addition, continued efforts will be made to improve the performance of companies acquired over the past few years. In the new markets of Mexico and Brazil, improved marketing effectiveness and the realisation of cost synergies will contribute to higher profitability.

The TCM programme will deliver further cost savings, although at a lower level than in 2010 following the earlier than planned realisation of savings in 2010. As a result of ongoing efficiency improvements, Heineken expects a further organic decline in the number of employees.

For 2011, capital expenditure related to property, plant and equipment is forecast to be approximately €850 million.

Heineken does not expect material changes to the effective tax rate (beia) in 2011 (2010: 27.3%) and forecasts an average interest rate slightly above 5.5%.

Free operating cash flow generation is expected to remain strong, further reducing the level of net debt in 2011. Following two consecutive years of substantially reduced capital expenditure and significantly higher cash flow generation, the cash conversion rate for 2011 will be around 100%.