In this illustrative photo, bottles of Heineken beer are displayed on July 31, 2023 in San Anselmo, California.
Justin Sullivan | Getty Images
Heineken shares fell throughout the day on Monday after the brewing giant's first-half profit growth came in weaker than analysts' expectations.
The company's shares temporarily fell 10.14% at the close of markets in Europe.
Operating profit showed organic growth of 12.5%, below the company's consensus forecast of 13.2%.
Beer sales, which had been expected to grow 3.4%, rose just 2.1%.
Heineken reported a net loss of €95 million ($103 million), primarily due to a €874 million non-cash impairment on its investment in Chinese brewer CR Beer. Heineken said the decline was due to a drop in CR Beer’s share price amid concerns about consumer demand in China, rather than the Chinese company’s operating performance.
“We are very pleased with the strong performance in the first half of the year,” Heineken CEO Dolf van den Brink told CNBC on Monday, describing volume growth as “balanced and broad-based across our global footprint,” with a 5% increase in premium products.
In an update that analysts were eagerly awaiting, Heineken revised its forecast for organic growth in operating profit this year to a range of 4% to 8%. The company’s previous guidance had been for low to high single digit growth.
“Heineken has gained momentum following upbeat comments at a recent conference which have led to the market (and ourselves) improving estimates,” Barclays analysts said in a note on Monday.
“However, these results fell short of expectations, indicating a gap between the company’s messaging and analyst expectations. This gap must be closed.”
The main drag on results was in Europe, where earnings grew by just 0.2% versus expectations of 15.1%, largely due to increased promotional spending in a competitive market, Barclays said.
Heineken said it had “strengthened its leadership” in sales of low-alcohol and non-alcoholic beers, with sales of Heineken 0.0 – a non-alcoholic beer – up 14%. The category saw double-digit growth in markets including Brazil, Egypt, Vietnam and the UK
Van den Brink described the category as “more important” for the company on Monday, especially Heineken 0.0.
Market research suggests that growth in low-alcohol and alcohol-free products, including beer, is set to significantly outpace the wider alcohol industry over the coming years, making it a prime target for established brands, as well as new entrants.
Van den Brink also added that input cost pressures on the company have reduced significantly.
“In Europe and the Americas, input costs were much more modest than last year, which allowed us to reduce prices significantly. This is very important to rebalance our revenue growth with volume and price growth,” he told CNBC.
