Amsterdam, 28 October 2020 – Heineken N.V. (EURONEXT: HEIA; OTCQX: HEINY) today publishes its trading update for the third quarter of 2020.
Dolf van den Brink, Chairman of the Executive Board / CEO, commented:
"Our performance during the third-quarter continued to be impacted by the COVID-19 crisis. As many lockdowns eased, our volumes improved sequentially compared to the last quarter.
We outperformed the category across most of our key markets, with Heineken® showcasing a stellar performance. We continued strict cost mitigation actions whilst balancing investments behind our brands and future growth opportunities.
The situation remains highly volatile and uncertain. We expect rolling outbreaks of COVID-19 to continue to meaningfully impact many of our markets in addition to rising recessionary pressures.
As we navigate the crisis, we are deliberately shaping how to adapt and emerge stronger from the pandemic. I am proud of the relentless drive of our employees and the agility they continue to demonstrate, taking care of one another, our customers, suppliers and communities."
THIRD QUARTER VOLUME BREAKDOWN
|Beer volume1 |
(in mhl or %)
|3Q20|| Organic |
| Total |
|YTD 3Q20|| Organic |
| Total |
|Africa, Middle East & Eastern Europe||10.3||-2.5||%||-2.5||%||28.4||-11.5||%||-11.5||%|
|Kurzfristig positionieren in Heineken|
|mit starkem Hebel|
|mit moderatem Hebel|
|Heineken® volume1 |
(in mhl or %)
|3Q20|| Organic |
|YTD 3Q20|| Organic |
|Africa, Middle East & Eastern Europe||1.5||-20.8||%||3.9||-24.2||%|
1 Refer to the Definitions section for an explanation of organic growth and volume metrics.
From the onset of the COVID-19 crisis, our first priority has been our people's health and safety. We have ensured that employees follow strict hygiene and physical distancing guidelines and receive support to do their jobs safely. To provide security to our employees, HEINEKEN has committed to no structural lay-offs because of COVID-19 during 2020.
We continue to support our customers, suppliers and the communities most impacted by the pandemic. We continue to assist our customers with advice and tools, pay all our suppliers on time and reduce payment terms to some small suppliers. Additionally, we provide pandemic relief to support front-line medical facilities in the communities where we operate, including water, non-alcoholic beverages, hand sanitiser, and monetary contributions.
The COVID-19 crisis continued to affect all geographies during the third quarter. Beer volume declined organically by 1.9% in the third quarter, a sequential improvement relative to the previous quarter across all regions. The on-trade remained affected by restrictions to operate and some important markets like South Africa and parts of Mexico faced bans on the sale of alcoholic beverages. Our performance was ahead of the market in most of our key markets.
Africa, Middle East & Eastern Europe
REPORTED NET PROFIT
The reported net profit for the first nine months was €396 million (2019: €1,667 million). Continued cost mitigation actions partially mitigated the impact from lower volume, adverse product and channel mix and incremental expenses driven by the crisis, including credit losses and impairments on tangible and intangible assets.
The COVID-19 pandemic is having a significant impact on our markets and wider business in 2020. In April, we withdrew all guidance for 2020, given the lack of visibility on the duration of the pandemic's impact. Consequently, HEINEKEN is only able to share directional information for the remainder of the year.
Although we have observed a recovery over the summer, continued volatility is expected for the fourth quarter, as many markets experience additional waves and the corresponding restrictions, including on-trade closures and crisis-related economic consequences. Currently, new restrictions have been imposed by governments across many countries in Europe, including a full closure of the on-trade. In Asia Pacific, new restrictions are also in place in Malaysia, Myanmar and Sri Lanka.
Product and channel mix is expected to continue to adversely impact results, especially in Europe, as the on-trade remains more affected than the off-trade. Input costs per hectolitre are expected to be significantly higher than last year.
Mitigation actions will continue for the remainder of 2020. We are reducing all discretionary expenses while providing sufficient support behind our brands and route to markets. In the second half of last year costs were skewed towards the third quarter, so the benefits of the mitigation actions will be lower in the fourth quarter.
Most of our non-committed supply chain CAPEX remains suspended, while commercial CAPEX has resumed where it is required to support our current and future top-line growth.
The relative effect of permanent items in the income tax line will be less adverse in the second half than in the first half due to a higher profit before tax base.
Given the uncertainty in profit estimations for this year it is not possible to provide a reliable estimate of the translational currency impact. This year many currencies have depreciated versus the Euro, most notably the Mexican Peso and the Brazilian Real.
Our current strategic review efforts are focused on shaping the company to emerge stronger from the COVID-19 crisis. We aim to increase adaptability with a clear focus on customers and consumers to regain and sustain future growth. We are exploring how to accelerate and expand our sources of growth while simplifying and right-sizing our cost base. To improve agility and speed in an increasingly dynamic environment, we are reviewing the effectiveness and efficiency of our organisations at head office, regional offices and each of our local operations.
As part of this ambition, while maintaining our commitment to no restructuring related to COVID-19 in 2020, we will streamline our head office and regional offices with an expected reduction of around 20% in related personnel costs. Implementation will begin in the first quarter of 2021. The impact and timelines of restructuring in our local operations will vary depending on the specific circumstances of each operating company. The process will be in close collaboration with our Employee Representatives (HEINEKEN's Group Works Council and Labour Unions).
On 9 September, HEINEKEN announced its entry into the Peruvian beer market by acquiring local beer brand Tres Cruces and incorporating its local operating team in Lima. To support its strategy in Peru, HEINEKEN entered into a strategic partnership with AJE Group to be its local sales and distribution partner in the traditional channel.
On 17 September, HEINEKEN announced it is exploring the Hard Seltzer category with the launch of Pure Piraña in Mexico and New Zealand. It will be available in a range of up to nine different flavours to test local preferences. HEINEKEN is also exploring additional market introductions into this category.
Earlier today, HEINEKEN announced the acquisition of cider brand Strongbow from Asahi Group Holdings Limited (Asahi) in Australia, along with two other cider brands, Little Green and Bonamy’s. The company will also gain the perpetual licenses on beer brands Stella Artois and Beck’s in Australia. The acquisition is subject to regulatory approval and comes after a successful bid for these brands when Asahi put them up for sale as a condition from the Australian Competition and Consumer Commission for their acquisition of Carlton & United Breweries. The acquisition brings the Strongbow brand in Australia home to HEINEKEN and scales up our beer and cider portfolio in one of the world’s leading beer and cider markets.
|Tim van der Zanden||José Federico Castillo Martinez|
|Director of Global Communication||Director of Investor Relations|
|Michael Fuchs||Janine Ackermann / Robin Achten|
|Corporate & Financial Communication Manager||Investor Relations Manager / Senior Analyst|
|E-mail: email@example.com||E-mail: firstname.lastname@example.org|
|Tel: +31-20-5239355||Tel: +31-20-5239590|
HEINEKEN is the world's most international brewer. It is the leading developer and marketer of premium beer and cider brands. Led by the Heineken® brand, the Group has a portfolio of more than 300 international, regional, local and specialty beers and ciders. HEINEKEN is committed to innovation, long-term brand investment, disciplined sales execution and focused cost management. Through "Brewing a Better World", sustainability is embedded in the business. HEINEKEN has a well-balanced geographic footprint with leadership positions in both developed and developing markets. It employs over 85,000 employees and operates breweries, malteries, cider plants and other production facilities in more than 70 countries. Heineken N.V. and Heineken Holding N.V. shares trade on the Euronext in Amsterdam. Prices for the ordinary shares may be accessed on Bloomberg under the symbols HEIA NA and HEIO NA and on Reuters under HEIN.AS and HEIO.AS. HEINEKEN has two sponsored level 1 American Depositary Receipt (ADR) programmes: Heineken N.V. (OTCQX: HEINY) and Heineken Holding N.V. (OTCQX: HKHHY). Most recent information is available on HEINEKEN's website: www.theHEINEKENcompany.com and follow us on Twitter via @HEINEKENCorp.
Market Abuse Regulation
This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.
This press release contains forward-looking statements with regard to the financial position and results of HEINEKEN's activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond HEINEKEN’s ability to control or estimate precisely, such as future market and economic conditions, developments in the ongoing COVID-19 pandemic and related government measures, the behaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquired businesses and achieve anticipated synergies, costs of raw materials, interest-rate and exchange-rate fluctuations, changes in tax rates, changes in law, change in pension costs, the actions of government regulators and weather conditions. These and other risk factors are detailed in HEINEKEN's publicly filed annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which speak only of the date of this press release. HEINEKEN does not undertake any obligation to update these forward-looking statements contained in this press release. Market share estimates contained in this press release are based on outside sources, such as specialised research institutes, in combination with management estimates.
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