Heineken lowers 2018 profit prediction in ‘volatile’ economic conditions

Beer giant Heineken’s profits fell in the first half of 2018 amidst a “volatile” economic climate, according to the firm’s first half-year results posted this week.

The dutch brewer — which also counts Newcastle Brown Ale, John Smith’s, Dos Equis, Murphy’s stout, Amstel, and more recently Lagunitas as part of its portfolio — reported a 3% drop in half-year operating profits to €1.75bn (£1.56bn).

Share price fell on Monday morning by 5% after Heineken reported narrower profit margins than expected, although consolidated beer volume grew 4.5% and net revenue per hectolitre grew 1.1%

Heineken said profit margins were smaller than expected due to its recent acquisition of the Brazilian, loss-leading arm of Japanese beer brand Kirin, as well as “adverse currency effects” across its international business. It said it expects the margin to shrink by 0.2 percentage points by the end of the year, instead of the 0.25 point boost it predicted in February, as “economic conditions are expected to remain volatile.”

Heineken bought Kirin’s Brazilian operation last year for $700m (£532m). It said that the “dilutive impact of the consolidation of Kirin Brazil was higher than expected.”

The drinks giant also reported that the pubs it acquired from Punch in 2017 are now fully integrated into its on-trade group Star Pubs & Bars, and are performing “in line with expectations.”

Meanwhile, Heineken is investing £6m into its pub chain to enhance their “kerb appeal” on the high street.

New outdoor areas will be created at 120 pubs, adding more covers for alfresco eating and drinking and better space for licensees to hold events. The announcement comes shortly after UK pub group and brewer Marston’s reported strong sales in the 42 weeks to 21 June thanks in part to its pubs — the majority of which have outdoor areas — benefitting from higher footfall prompted by unusually good weather this summer.

Property director, Chris Moore, said the investment is “vital” to Star’s growthy.

“Our research shows it sends all sorts of signals to passersby on what they’ll find inside. Our own calculations suggest a properly designed garden can increase drink and food sales by as much as £50,000 a year.”

As well as Kirin, Heineken has made investments in international breweries over the past year, most recently in London-based craft brewer Beavertown. The beer giant bought a minority stake in the business earlier this year for £40 million, which Beavertown said will go towards the construction of a new brewing facility expected to create 150 jobs.