Manufacturing & Supply Chain

Heineken has reported a 14% increase in net profit (beia) to €772 million – up 19% organically – on revenue down 1.4% to €10.2 billion. However, on an organic basis, group revenue increased by 4.6%, made up of a 3.1% increase in group total volume and a 1.5% increase in group revenue per hectolitre. In the second quarter group revenue grew 5.5%, on an organic basis.

Group beer volume grew 3.1% organically in the first half of the year reflecting successful marketing programmes, increased innovation and strengthened sales execution. Volume performance also benefited from favourable weather and the football World Cup against a soft comparable prior year period. This led to market share gains in several of Heineken’s key markets including Nigeria, Vietnam, France, The Netherlands, USA, Spain and Brazil.

Group operating profit (beia) grew 13% organically, primarily reflecting higher revenues and improved cost efficiencies across production, logistics and head office support expense, partly offset by higher planned marketing and selling expense. Group operating profit (beia) margin increased by 130 basis points in the first half led by Africa Middle East and the Americas.

Heineken delivered €141 million of pre-tax cost savings in the first half of 2014 from its Total Cost Management2 (TCM2) programme. The supply chain function contributed 75% of achieved cost savings in the period. This brings the cumulative cost savings realised since the beginning of 2012 to €637 million, ahead of the targeted cost savings of €625 million for the 3-year period ending 2014.

Heineken is targeting year-on-year improvement in consolidated operating profit (beia) margin of around 40bps in the medium term but expects to be above this target level in 2014.

Jean-François van Boxmeer, chairman and chief executive of Heineken, comments: “With revenue and profit growth in nearly all regions, this is a very good first half performance. This progress is the result of a continued disciplined strategic focus with sustained investment in our brands and strengthened commercial execution. Our emphasis on innovation has enabled us to exceed our target and deliver €682 million of revenues. Heineken® premium volume grew 6.6%, reflecting strong gains in key markets such as France, Nigeria, Russia, Brazil and China.”

He adds: “We also delivered our 3-year cost savings target of €625 million six months ahead of schedule. The economic outlook remains mixed and we expect some moderation in top-line and profit growth in the second half of the year. We are confident that our strong brand portfolio, geographic breadth and focus on cost control will result in healthy top and bottom line growth in 2014 and beyond.”