Heineken shares slide as profit outlook underwhelms

Feb 14, 2024

LONDON (Reuters) -Heineken’s profit forecast disappointed investors on Wednesday, sending its shares down 6.5% as the world’s second-largest brewer struck a more downbeat tone than rivals.

The Dutch brewer said annual operating profit growth could be anywhere between a low and high single-digit percentage in 2024, having warned that tough economic conditions could weigh on demand in some markets this year.

Analysts had been anticipating a 9.9% increase on average, as sharp increases in costs ease off.

Chief Executive Dolf van den Brink told analysts that Heineken did expect to sell more beer in 2024 and a number of other factors weighing on its performance in recent years should recede. But the company remained cautious.

“We also learned our lesson: the world is a volatile place,” he said, adding the company had a broad global footprint, including in some unstable markets.

Chief financial officer Harold van den Broek added that Heineken could be helped by factors like better weather, sporting events and wage inflation giving people more money to spend on beer.

But, he added, events outside of Heineken’s control could also drag on its business.

The comments contrasted with the more upbeat tone of Heineken’s peers. Carlsberg, for example, recently raised its medium-term targets for revenue and operating profit and the industry broadly is expected to benefit from margin expansion this year.

Heineken should be getting on board with that more positive story, said Tom O’Hara, portfolio manager at Janus Henderson, a Heineken investor.

“This year is meant to be good for them,” he said.

COSTS STILL RISING

Heineken still faces possible disruption in the key markets of Nigeria and Vietnam, which largely drove a 4.7% decline in volumes in 2023 and helped force a guidance cut in July.

Even in markets where it performed strongly, like Mexico and Brazil, Heineken would like to see broader market growth to feel reassured, van den Brink said.

Heineken will focus on restoring volume growth in 2024, which was hurt in 2023 by steep price increases to offset high costs.

It did not expect to significantly hike prices further in regions like Europe, van den Brink said.

Input costs would still rise slightly in 2024. Costs of commodities like sugar were rising in emerging markets, while in Europe Heineken expects to increase wages, executives said.

Heineken’s shares were down 6.27% at 1518 GMT.

($1 = 0.9331 euros)

(Reporting by Emma Rumney; editing by Sonali Paul, David Goodman and Elaine Hardcastle)

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