FDBusiness.com

Helped by the integration of its FEMSA acquisition in Latin America and continued growth of its flagship brand, Heineken increased net profit by 41% to Eur1.44b for 2010 on revenue up 9.7% to Eur16.13b. On an organic basis, net profit (beia) rose by 19.7%, driven by solid EBIT (beia) growth and lower interest costs, but consolidated beer volume and revenue were down by 3.1% and 2.2% respectively.

During the year, Heineken successfully completed the integration of the beer operations of FEMSA. On a pro forma basis, EBIT (beia) of these operations increased 44% to Eur397m and pre-tax cost synergies of Eur42m have already been realised. Heineken’s Total Cost Management (TCM) programme delivered Eur280m pre-tax savings in 2010.

Jean Francois van Boxmeer, chairman and chief executive of Heineken.

“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,” comments Jean Francois van Boxmeer, chairman and chief executive.

He continues: “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.”

Outlook

The relentless focus on cost reduction, global synergies and cash flow generation, which was a feature of 2010, will continue in 2011 and beyond.

Heineken expects volume sales in Latin America, Africa and Asia to benefit from ongoing robust economic conditions aided by the group’s marketing and investment programmes. Despite an improving economic environment in Europe and the US in 2011, the impact of austerity measures and high unemployment will result in continued cautious consumer behaviour in these markets, according to Heineken.

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 the brewer’s commitment to strengthening its leadership position in the region.

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.