Heineken beats forecasts after cutting costs

City A.M. Reporter
Heineken, the world's third-largest brewer, beat market forecasts for 2010 earnings on as cost savings more than offset lower beer sales.

Heineken said it expected drinkers in Latin America, Asia and Africa to buy more of its lagers and other drinks this year and said it would mitigate an expected low single-digit percentage increase in input costs with higher prices.

Investors had been keen to hear the Dutch brewer's outlook on rocketing raw material costs, likely to be a hot issue in 2011. The futures price for malting barley has risen 51 per cent since the launch of the contract in May last year.

The group, whose chief brands are Heineken and Amstel, Europe's number one and three beers, said it expected European and US consumers to be cautious this year, with an improving economy but higher unemployment and austerity measures.

It added that the premium beer segment, including its Heineken brand in many markets, would outperform the overall beer market.

Rival SABMiller, with a strong presence in faster- growing African and Latin American markets, said last month its lager volumes rose three per cent in the final three months of 2010.

Heineken, for whom western Europe made up over half of revenues in 2009, suffered a group volume decline on a like-for-like basis of 3.1 per cent in 2010.

Heineken's purchase of the beer business of Mexico' FEMSA is set to boost its operating profit from more buoyant emerging markets to 40 per cent from 32 per cent as well as securing brands Dos Equis, Tecate and Sol.

The Dutch brewer's net profit before one-offs rose by 37 per cent last year to 1.45bn euros (£1.21bn), against the average 1.38bn euros expected in a Reuters poll of 11 brokers.

On a like-for-like basis, the increase was 19.7 per cent. Heineken had forecast a rise of at least a low double-digit percentage.

Operating profit before one-offs rose by 25 per cent, or 8.6 per cent on a like-for-like basis, to 2.61 billion euros, compared to a consensus forecast of 2.47bn euros.

The company delivered 280m euros of savings under its total cost management programme, as well as 42m euros in synergy savings from its Mexican takeover.