Shares in Heineken tumbled in early trading today (29 July) after the brewer included an impairment charge in China in its first-half accounts.
The Amstel brewer posted a half-year loss of €95m ($102.9m) after writing down the value of its stake in Chinese brewer CR Beer. The move led to an impairment charge of €874m.
Heineken also raised its forecasts for its adjusted organic operating profit and adjusted organic net profit for 2024.
However, the new guidance for the operating profit metric was still lower than the consensus among analysts covering Heineken.
Moreover, the growth in the group’s organic beer volumes in the first half also missed analyst projections.
At 10:56 CEST, the brewer’s shares were down 7.1% on the day at €84.26. So far this year, Heineken’s share price is down 7.47%.
“Heineken gathered momentum following optimistic comments at a recent conference leading the market (and ourselves) to improve estimates. However, these results missed forecasts, suggesting there was a gap between the company's messaging and analyst expectations. This needs to close,” Barclays analyst Laurence Whyatt wrote in a note to clients.
Heineken holds 40% of CRH (Beer) Limited (CBL) after a deal struck in 2019. CBL in turn owns a controlling interest of 51.67% in the Hong Kong-listed China Resources Beer (Holdings) Co. Ltd (also known as CR Beer).
As a consequence, Heineken has an effective 20.67% economic interest in CR Beer.
In Heineken’s results statement today, the group said the fair value of its investment in CR Beer, based on the share price, was below its cost as of 31 December 2023.
However, it said on 30 June, “a significant decline in the fair value of the investment below its cost was identified”.
Heineken pointed to trading conditions in China. “The decline was driven by concerns on the macroeconomic environment in China and a negative view on consumer goods companies seen as more exposed to soft consumer demand,” it said.
The brewer did say the volumes of Heineken-branded beer it sold in China in the first half of 2024 were “up more than 25%”.
Overall, Heineken saw a 9.2% rise in the volumes of its namesake brews it sold in the opening half of the year. Group beer volumes rose 2.1% in the first half on an organic basis. However, the consensus forecast among analysts was for growth of 3.4%.
Revenue was up 2.2% at €17.82bn. Underlying net revenue rose 6%, compared to analyst forecasts of 7.7% growth.
Reported operating profit fell 4.3% to €1.54bn but, on an underlying basis, grew 12.5% to €2.08bn.
Underlying net profit rose 4.4% to €1.2bn.
Heineken CEO and chairman Dolf van den Brink said the Tecate brewer “delivered a solid first half of the year”.
He added: “The Americas region stood out, as portfolio mix and major ongoing saving initiatives resulted in a strong operating profit improvement, notably in Brazil and Mexico. APAC returned to growth, led by India and with the Vietnamese beer market stabilising. We are actively navigating volatility in Africa. In Europe, we gained market share in the majority of our markets and beer volume was slightly up compared to last year despite poor weather in June.
“In the second half, we will materially step-up investment in market and sales expenditures, with notable increases in key markets.”
Heineken now sees its adjusted organic operating profit growing by 4-8% in 2024.
The brewer predicts its adjusted organic net profit will rise “more closely in line” with the expected growth in underlying operating profit.
In April, Heineken had forecast its adjusted organic operating profit would grow “by a low- to high-single-digit” this year. It said then it expected its adjusted organic net profit would rise at a slower rate than the operating profit metric.
