Heineken slashes asset value by €550 million

Rising supermarket sales were not enough to keep Dutch brewer Heineken’s profits steady after global coronavirus lockdowns forced bars and restaurants to close.

The world’s second largest brewer, which makes Amstel, Bira Moretti and Heineken, has slashed the value of its assets by €550 million, and expects to make a €300 million loss in the second financial quarter of this year.

Heineken’s operating profits fell year-on-year by 52.5% in the six months to June 2020, the brewer said in a preliminary results statement. Net profit fell by 75.8% compared to the first half of 2019.

Overall, net revenue fell16.4% for the first half of 2020 on an organic basis, and volume sales declined by 11.5%.

The company’s retail sales in Europe say “mid-teen” growth, and increased its market share. However, Heineken is heavily present in the on-trade in this region, which meant its operating profit was “disproportionately affected” as venues were forced to close for months on end.

Moreover, it cost Heineken more to produce beer during the pandemic this year, thanks to a combination of unfavourable currency exchange rates and a shift away from packaging in kegs for the on-trade.

The company said it took “significant cost mitigation actions” in the first half of this year, and is “committed to further intensify its focus on costs.”

It also said the Heineken brand performed relatively well, with a small volume decline of 2.5%. Other companies such as Chilean wine group Concha Y Toro have said they are also relying on core brands while consumers tend to opt for familiarity in economic uncertainty. Earlier reports of rising low and no-alcohol beer sales during lockdown have also helped Heineken this year. Its non-alcoholic beer brand, Heineken 0.0, saw growth “across all regions and with particular strength in the US and Mexico.”