Heineken Revenues Rise in Q3, Maintains Outlook

Revenue grew 7.1% to €4,974 million in the third quarter. Combined, the first time consolidation of new businesses and a positive currency translational effect increased revenues by €140 million (+3.0%).

24 Oct 2012 --- Heineken N.V. has announced its trading update for the third quarter of 2012. In the quarter:
•  Revenue rose 4% organically, driven by higher total consolidated volumes of 1.5% and revenue per hectolitre growth of 2.5%. Group beer volume grew 2.6% with increases in four out of five regions;
•  Heineken volume in the international premium segment increased 3.5%, outperforming group beer volume, primarily driven by strong performance in Western Europe, the Americas and Africa & the Middle East;
•  EBIT (beia), on an organic basis, increased in the mid-single digits;
•  Net profit (beia) grew organically by mid-single digit percentage points; and
•  HEINEKEN reaffirms its outlook for full year 2012 net profit (beia) to be broadly in line with last year, on an organic basis.

Revenue grew 7.1% to €4,974 million in the third quarter. Combined, the first time consolidation of new businesses and a positive currency translational effect increased revenues by €140 million (+3.0%). The favourable currency movement primarily reflects appreciation of the Nigerian naira, British pound and Mexican peso versus the euro reporting currency. On an organic basis, revenue grew 4% with growth across all regions. This reflects total consolidated volume growth of 1.5% and revenue per hectolitre growth of 2.5%, driven by pricing initiatives and improved sales mix.

On an organic basis, EBIT (beia) increased by mid-single digit percentage points in the quarter. The positive impact of higher revenue and realised cost savings were partly offset by higher business capability investments and increased input costs.

Reported net profit in the quarter was €577 million compared with €525 million in the third quarter of 2011.

The main consolidation scope changes having an impact on financial results in the third quarter of 2012 include:
•  The acquisition of the Harar and Bedele breweries in Ethiopia, consolidated from 4 August 2011;
•  The acquisition of the Galaxy Pub Estate in the United Kingdom, consolidated from 2 December 2011; and
•  The acquisition of a controlling stake (from 22.5% to 95%) in Brasserie Nationale d’Haiti S.A in Haiti, consolidated from 17 January 2012.

HEINEKEN reaffirms its 2012 outlook, as stated in its half year 2012 earnings release dated 22 August 2012.

Total consolidated volume grew organically by 1.5% in the third quarter. Growth in consolidated beer and soft drinks volume was partly offset by lower third party and cider volume.

Group beer volume grew 2.6% on an organic basis, with growth in four out of five regions. There was one less selling day in the third quarter of 2012 compared with the comparable prior year period.

In Western Europe, group beer volume declined by 2.1% organically in the quarter. Lower group beer volume primarily reflects the planned withdrawal of a product in the high-promotion discounter channel in Finland and a double digit volume decline in Portugal due to the challenging economic environment. The effect of cautious consumer spending in the on-premise channel contributed to a low-single digit decline in the UK, Netherlands and Spain. Volume in France and Italy grew in the low-single digits. The acquisition of the Belgian cider innovation company Stassen, was completed in September 2012.

In Central & Eastern Europe, group beer volume grew 3.6%, on an organic basis, led by solid volume gains in Bulgaria, Czech Republic, Poland, Romania, Russia and Serbia. Volume in Greece declined in the high-single digits as the country continues to be impacted by the adverse economic conditions.

In Africa & the Middle East, group beer volume grew 3.5%, driven by solid volume growth in Egypt, Algeria, Rwanda and the joint venture in the Republic of Congo. Volume in Nigeria grew slightly, contributing to further share gains in a market where consumer spending has been constrained due to higher inflation. Volume in South Africa was broadly in line with the prior year quarter, outperforming the overall beer market and leading to continued market share gains.

In the Americas, group beer volume grew organically by 4.4%, driven by higher volume in Mexico, Brazil and the USA. Depletions in the USA increased in the low-single digits resulting in market share gains in the country. The Dos Equis brand continued its strong volume growth momentum, while depletions of the Heineken lager brand were broadly in line with the prior year period.

In Mexico, solid volume growth was again led by strong brand performances of Dos Equis and Tecate. Volume growth in Brazil was driven by continued strong growth of the Heineken brand and higher volume of the Kaiser brand. Volume of Compania Cerveceria Unidas (CCU), the joint venture operation in Chile and Argentina, was broadly in line with the prior year quarter.

In Asia Pacific, group beer volume increased 4.8% organically (+310 khl), net of a consolidated beer volume decline of 2.8% (-10 khl). Higher volume of the joint venture, APB, was driven by gains in Vietnam, Indonesia, Thailand and Singapore. Volume of United Breweries Limited, the joint venture operation in India, increased in the high-single digits, with strong performance in key states such as Maharastra, Rajasthan and Karnataka. Volume in consolidated Asian export markets declined by low single digits, with strong growth in South Korea more than offset by lower volume in Taiwan.

Volume of the Heineken brand in the international premium segment grew 3.5% in the third quarter and 5.1% in the first nine months of 2012. Key markets contributing to Heineken brand growth in the third quarter were Brazil, Canada, China, France, Italy, Mexico, Nigeria, Russia and the UK. Lower volume of the Heineken brand in the Asia Pacific region reflects the introduction of new competitor brands in Taiwan and lower brand volume in Vietnam, where the overall premium portfolio grew strongly led by the Tiger brand.

Volume of Desperados, the super-premium tequila-flavoured speciality beer, grew in the double digits, with growth in all markets.

Volume of Sol in the international premium segment grew in the mid-single digits with solid performances in the Western Europe and Central & Eastern Europe regions.

Amstel volumes grew by low single digits, mainly reflecting higher brand volumes in the Africa & the Middle East and Central & Eastern Europe regions. The launch of Amstel Premium Pilsner in Russia, Greece and Serbia earlier this year supported brand volumes.

Volume of Strongbow, our cider brand, declined by low-single digits in the quarter with lower volume in the UK only partially offset by strong growth in the USA and South Africa.

On 2 October 2012, HEINEKEN placed Senior Notes for a principal amount of US$3.25 billion. This comprises US$500 million of 3 year Notes at a coupon of 0.80%, US$1.25 billion of 5 year Notes at a coupon of 1.40%, US$1 billion of 10.5 year Notes at a coupon of 2.75% and US$500 million of 30 year Notes at a coupon of 4.00%. The proceeds of the Notes will be used to finance the acquisition of APB.

On 28 September 2012, HEINEKEN announced that at the Extraordinary General Meeting (EGM) of Fraser and Neave, Limited (F&N) in Singapore, shareholders of F&N voted in favour of the proposed disposal by F&N of its direct and indirect interests in APB and F&N's interest in the non-APB assets held by Asia Pacific Investment Private Limited, for a total consideration of S$5.6 billion (€3.5 billion) (Transaction).

HEINEKEN currently holds an effective stake of 55.6% in APB. Upon completion of the Transaction HEINEKEN will own a 95.3% stake in APB. Following approval from the Overseas Investment Office of New Zealand on 9 October 2012, the Transaction remains subject to regulatory approval from the Competition Commission of Singapore (CCS). The Transaction is expected to complete in November 2012.

HEINEKEN will then make a Mandatory General Offer (MGO) for all the shares of APB that the HEINEKEN group does not already own, in accordance with the Singapore Code on Take-overs and Mergers. Subsequently HEINEKEN will seek to delist APB.

The Transaction and the MGO will be funded through centrally available cash of approximately €3.5 billion. In addition, HEINEKEN has a committed revolving credit facility of €2 billion which currently remains undrawn. Further reference is made to HEINEKEN’s announcement regarding the Transaction on 28 September 2012.