Heineken 2011 Earnings Fall, Plans To Cut Costs, Employees
By Toby Sterling
AMSTERDAM (AP) -- Heineken NV, Europe's largest brewer by sales, reported a fall in profits in 2011 due to rising costs, though a thirst for its beer in developing markets kept revenues buoyant.
The company said Wednesday that net profit over the year fell 1.4 percent to euro1.43 billion ($1.88 billion), from euro1.45 billion in 2010, hit by restructuring costs, higher commodity and labor costs, and higher taxes.
Revenues grew 6.2 percent, boosted by the acquisition in April 2010 of Mexican brands including Sol, Dos Equis and Tecate.
Heineken said revenues grew 3.6 percent excluding the impact of acquisitions, as increases in Eastern Europe, Africa and Asia offset stagnation in Western Europe, where British consumers in particular avoided the company's Strongbow cider.
Heineken also owns the Newcastle, Amstel, and Birra Moretti brands, among others. Volume increases accounted for 2.1 percent of the revenue rise while prices hikes made up the balance.
Analysts said the company's earnings were better than expected and shares rose 4.6 percent to euro38.23 in Amsterdam trading. Shares are down 12 percent since May 2011.
"Earnings in Western Europe have been supported by cost savings," said analyst Richard Withagen of SNS Security, who rates shares a Hold. He noted that the company's performance was better than it had itself indicated after the first half.
Heineken said operating profit would have risen 2.8 percent to euro2.70 billion under its preferred measure, which ignores "exceptional" costs and gains, including the costs of its ongoing restructuring programs, as well as the cost of writing down the value of acquisitions for which it paid more than book value. Heineken said net exceptional operating costs were euro110 million greater in 2011 than in 2010.
Actual operating profit fell 1.4 percent to euro2.46 billion.
A recovery in Russia accounted for fully a third of Heineken's volume growth. Meanwhile, Vietnam has become the second-largest market for Heineken-branded beer.
In the U.S., sales of Heineken shrank but Mexican brands, notably Dos Equis, grew.
Heineken didn't issue a profit forecast for this year, but a similar pattern to 2011 appears likely as the company said it expects a new 6 percent rise in raw materials costs in 2012, mostly due to higher malted barley prices.
The company hopes to absorb the impact again by increasing sales and cutting costs, including an unspecified number of employees.
In 2011, it cut 1,134 jobs and employed slightly fewer than 70,000 by the year's end.
Heineken Chief Executive Officer Jean-Francois van Boxmeer said the company's strategy is to "invest in emerging markets to maintain our growth" while focusing on the marketing and packaging necessary to sell more of its high-margin brands in Europe. Heineken bought the "official beer supplier" concession for the Olympic games in London this summer.
The company said capital spending would increase to euro1.25 billion in 2012 from euro800 million last year, "reflecting investment in additional capacity and the renewal and expansion of its returnable bottle fleet in higher growth markets."
Heineken is also part owner of the Kingfisher, Tiger and Anchor brands via joint ventures. The family-controlled company reports earnings twice annually.
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