Heineken, the Dutch brewing giant who is buying British pub chain Punch Taverns, today said it's expanded its margins despite challenging economic conditions.
Net profit fell 18.6 per cent to €1.54bn (£1.31bn), while operating profit increased by 9.9 per cent to €3.54bn excluding currency movement and one-offs.
Sales in Heineken's premium segment increased 3.7 per cent, and consolidated beer volume grew three per cent overall with growth in America, Asia Pacific and Europe offsetting weaker volume in Africa, the Middle East and Eastern Europe.
The brewer lifted its annual dividend up 3.1 per cent at €1.34 a share from €1.30 a share in 2015.
Heineken's shares increased more than four per cent in morning trading.
Why it's interesting
Heineken, the world's second-largest brewer, is committed to growing its brand. It's now in the process of tying up acquisitions of Japanese rival Kirin's Brazilian operations and the UK's Punch Taverns.
However, the Dutch company has been met with opposition from Punch Taverns' landlords, who say the takeover will result in reduced beer and cider options for customers.
While sales improved in large European markets, Mexico and Asia, the company didn't perform as well in Nigeria, one of its top four markets, the Democratic Republic of Congo and Russia.
The maker of Tiger and Sol was hit by a negative impact from currencies comparable to last year and said economic conditions are expected to remain volatile in 2017.
It's set to meet its medium-term target for operating margin expansion of 40 basis points this year after a 54 point improvement in 2016.
What Heineken said
Jean-Francois van Boxmeer, chief executive and chairman said:
Our unique diversified footprint was again a competitive advantage, enabling us to deliver more than 50 basis points margin expansion, despite more challenging economic conditions in some developing markets and significant currency pressures.
Excluding major unforeseen macro economic and political developments as well as the impact of the proposed acquisitions in Brazil and in the UK, we expect continued margin expansion in 2017 in line with our previous guidance.
What an analyst said
Anna Ward, analyst at Euromonitor International said
Asia Pacific is a key focus for Heineken, with a number of its main markets set to see considerable growth over the forecast period, albeit starting from fairly low bases.
In 2016 Heineken signed a joint venture with Asia Brewery Incorporated in the Philippines. This highlights the company’s main strategy across much of the region – as large acquisition opportunities are very limited, the most effective route to growth is often to purchase a smaller or joint company and develop organically.