Heineken shares fizz on better than expected earnings and strong outlook

Heineken shares fizz on better than expected earnings and strong outlook
Heineken shares fizz on better than expected earnings and strong outlook

Shares in Dutch brewing giant, Heineken, surged by as much as 6% after it posted better-than-expected earnings for 2019 and said that it expects further growth this year.

Heineken’s chief executive, Jean-Francois van Boxmeer, is leaving on a high note.

The departure of Mr van Boxmeer was announced earlier this week. He will hand the baton to Dolf van den Brink, who leads the Dutch company’s Asia-Pacific operations, in June.

The world’s second-largest brewer reported earnings that beat analyst estimates, driven by the green-labelled flagship brand.

Mr Van Boxmeer has been CEO for almost 15 years, and has overseen €30bn worth of acquisitions. Those deals have turned the company into the world’s number-two brewer, after Anheuser-Busch InBev.

Full-year adjusted net income reached €2.52bn, driven by sales in Asia. The brewer’s namesake brand had its fastest shipment growth in more than a decade.

The incoming CEO has been with the Dutch brewer for more than two decades. His choice doesn’t come as a surprise, said analyst Jos Versteeg, at InsingerGilissen Bankiers, as Heineken had sufficient internal candidates and Asia has been growing in importance for the brewer.

Mr Van den Brink’s appointment “indicates that there are no major changes in the pipeline,” he said. “Shareholders buy Heineken for security. It is a very well-run company, where no crazy things happen.”

Sales from Asia Pacific rose 12%, more than twice as fast as any other region.

The company said its president for Europe, Stefan Orlowski, is leaving to pursue “private entrepreneurial interests.”

He was seen as a likely CEO candidate, having run a business that’s half of Heineken’s sales. Previously, he was in charge of the Americas.

Heineken has been depending more on the strong performance of its namesake brand lately, as consumers in developing economies move from low-end beers to international premium alternatives.

Brazil is now the largest market for the Heineken brand, after the company bought Kirin’s business in that country and turned it around. The brand had double-digit growth in 40 countries.

Mr Van Boxmeer’s global push culminated with a $3.1bn purchase of a 40% stake in China’s largest beer-maker, in 2018.

The deal with the brewer of the Snow brand helped the Dutch company to expand in a heated lager market that’s dominated by local labels.

The departing CEO joined the company as a management trainee, in 1984. He was named to the board of Heineken Holding, the vehicle through which the Heineken family controls the brewer.

Heineken has also forecast a boost to profits in 2020, driven by lower barley and aluminium costs.

The company said revenues should rise this year on higher volumes, prices, and consumers shifting to more expensive beers.

Along with a more moderate increase in input costs, that should result in a mid-single-digit percentage rise in operating profit in 2020, it added, while saying it was too early to assess the impact of the coronavirus outbreak on its business.

“We are cautious — we are just looking at the situation — but, for sure, it is not paralysing — that would be too big a word — but it will have some consequences,” Mr van Boxmeer said.

[‘i] – additional reporting, Bloomberg and Reuters

Source: Business News