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Brewing giant's profits drained in 2016 by currency turmoil

Samson Toromade

The Amsterdam-based brewery said profits had dropped 18.6 percent to 1.54 billion euros ($1.62 billion).

Heineken, the world's number two brewer, said profits had dropped 18.6 percent to 1.54 billion euros ($1.62 billion)in 2016
Heineken, the world's number two brewer, said profits had dropped 18.6 percent to 1.54 billion euros ($1.62 billion)in 2016

The Amsterdam-based brewery, which is the world's number two brewer, said profits had dropped 18.6 percent to 1.54 billion euros ($1.62 billion).

Global sales were only slightly up by 1.4 percent to 20.8 billion euros -- although revenue growth was slightly better at 4.8 percent when comparable figures were considered.

In 2017 "economic conditions are expected to remain volatile and Heineken has assumed a negative impact from currency comparable to 2016," the company said in a statement.

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Founded in the 19th century, Heineken produces and sells more than 250 brands including Desperados tequila-flavoured beer, Sol and Strongbow cider. It employs about 73,000 people around the world.

The company stressed its 2015 profits had been inflated due to the 1.2 billion euro sale of its Mexican packaging arm Empaque.

Stripping out that one-off effect, net profits actually rose 2.5 percent to 2.1 billion euros, Heineken said.

"Our unique diversified footprint was again a competitive advantage ... despite more challenging economic conditions in some developing markets and significant currency pressures," CEO Jean-Francois van Boxmeer said.

Performance "in key European markets was good and results in Vietnam and Mexico were strong," he added in a statement.

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However in "Africa, Middle East and Eastern Europe market conditions remained tough" especially in Nigeria, the Democratic Republic of Congo and Russia.

Globally, there has been fervent consolidation in the brewing industry.

In October, the world's biggest brewer Anheuser-Busch InBev, makers of Budweiser, Corona and Stella Artois, confirmed the sale of major businesses in Africa, Europe and Asia as it completed the mega-takeover of rival SABMiller.

The new company, which emerged from the historic tie-up, has cemented its dominant position as the world's top beer maker, and is called AB InBev.

The beer market is also evolving to focus on artisan brews, leading to smaller "microbreweries" that focus on quality rather than quantity.

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Heineken said it was proposing a 1.34 euro dividend per share, up slightly from 1.30 euros in 2015.

"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," Van Boxmeer added.

Japanese brewery Kirin announced on Monday that it would sell its Brazilian unit to Heineken for $706 million citing "a stagnant and competitive" market.

Kirin has concluded "there are certain limitations in transforming Brasil Kirin into a sustainable and high-profitable business on its own," it said in a statement.

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Samson Toromade Samson Toromade Samson Toromade is the Editor-in-Chief of Pulse Nigeria. Contact: samson.toromade@pulse.ng

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