Heineken cautious on 2024 profits amid economic volatility

Dutch brewer Heineken (HEIN.AS) on Wednesday forecast low- to high-single digit percentage growth in operating profit in 2024, citing volatility in geopolitics and economic conditions, which could deliver a result below market expectations.

Analysts on average expected the world’s second-largest brewer to achieve 9.9 per cent organic operating profit growth in its 2024 financial year, according to consensus estimates.

However for 2023, Heineken exceeded analysts’ forecasts for a flat result, reporting a 1.7 per cent rise in its full-year organic operating profit.

The company, whose namesake beer is Europe’s top-selling lager and also makes brands including Tiger and Sol, had already warned tough economic conditions could weigh on demand in some markets in 2024.

“Looking to 2024, we remain cautious about the global economic and geopolitical outlook,” Chief Executive Dolf van den Brink said in a statement, adding that the company would look to drive revenue growth from a balance of volume and prices.

Beer brewers hiked prices significantly throughout 2023 to offset steep increases in their costs, which hurt volumes. Heineken said its price increases had often led the market.

Its volumes declined by 4.7 per cent organically in 2023, with over 60 per cent of that driven by drops in Vietnam and Nigeria, where economic and political conditions hurt sales.

Heineken was forced to cut its 2023 forecast in July amid turmoil in those key markets for the company. The move spurred analysts to criticise the company for over-promising and then failing to deliver.

In light of continued economic and geopolitical uncertainty, Heineken said it would look to focus on restoring volumes including via investments in its brands and new ways of selling to consumers, such as online.

Costs were expected to rise by a low single digit per hectolitre, it said, adding it would deliver at least 500 million euros ($535.85 million) in gross savings in 2024 to protect margins.

Heineken booked a 491 million euro impairment charge related to its new southern African division, formed following the acquisition of South African drinks group Distell and Namibian Breweries in 2021.

($1 = 0.9331 euros)