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Heineken warns weak dollar will hit profits Original Source Link: (May no longer be active)
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Heineken warns weak dollar will hit profits
By Ian Bickerton in Amsterdam
FT.com site; Feb 25, 2004
Heineken, the world's third largest brewer by volume, on Wednesday warned that net profit would fall this year as the weak dollar continued to bite into its bottom line.
Speaking after unveiling flat 2003 net profit of €798m, Thony Ruys, chief executive, said currency impact would reduce income and wipe-out 2004 organic profit growth and the contribution from acquisitions.
Even without the currency factor, organic profit growth this year would struggle to match the 7 per cent improvement of 2003, he said.
Dollar weakness will cut €84m from net profit this year and €129m from the operating result. Currency hedging capped the bottom line impact at €27m in 2003.
While the dollar is Heineken's biggest headache, economic uncertainty, a smoking ban in bars and restaurants and poor weather in its north-east heartland also cast a pall over a "disappointing" US market.
Operational earnings, excluding extraordinary items and goodwill amortisation, from North and South America combined fell from €416m to €369m. US sales of Heineken's premium beer were flat as the total US beer market declined 0.8 per cent in volume terms.
Mr Ruys declined to forecast US market developments but said the region had started well in the first seven weeks of 2004. Heineken continued to gain market share despite sluggish growth in imports, which rose just two per cent in 2003, he said.
The company also reported that off-sales in the UK, where it relaunched Heineken as a premium beer last year, had not matched expectations, although sales in restaurants and pubs were on track.
It blamed a "fierce fight" in the imported beer segment for the shortfall in volumes sold through supermarkets but added it was not unduly troubled by the set-back to what will be a long-term re-branding push.
In central Europe, where Heineken is the biggest regional brewer following the acquisition of Austria's BBAG last year, the operating result, excluding extraordinary items and goodwill amortisation, rose from €78m to €93m.
Heineken's growing scale in the region - where further acquisitions are being sought - was reflected in a decision to break-out earnings for the first time, separate from the rest of Europe.
The company said it expected worldwide volumes for premium beers to continue growing, adding that it saw scope to expand sales and raise prices in several markets, while cutting costs.
Group net profit before extraordinary items and goodwill amortisation was 1.4 per cent higher at €806m compared to €795m in 2002.
Operating profit fell 4.7 per cent to €1.2bn, including a €74m charge for restructuring in the Netherlands, where 450 jobs are being cut, and an €88m currency hit.
Turnover rose 9 per cent to €9.25bn from €8.5bn, helped by acquisitions, an improved mix and higher prices.
The company announced plans for a five-for-four share split and proposed a dividend of €0.40 per share. Shares rose 2 per cent to €32.06 in Amsterdam.
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