Pandemic significantly impacts Heineken’s H1 business
The Heineken brand itself performed well in relative terms suffering only a 2.5% overall decline.
This was driven by an organic decline of 13.4% in total consolidated volume and an organic decline of 3.6% in net revenue per hectolitre according to Heineken which recently disclosed preliminary highlights of its 2020 half-year results ahead of the scheduled publication date of the 3rd of August. So all figures mentioned here are preliminary, unaudited and subject to adjustments from customary reviews, it stated.
Heineken’s markets and businesses were significantly impacted by the Covid-19 pandemic in the first half of 2020.
As a result of the unprecedented volatility and uncertainty, on the 8th of April Heineken nv withdrew its guidance for the year.
However the Dutch brewer has stated that despite these “short-term” challenges, it “remains confident in its ability to navigate the crisis”.
As expected, the impact of the Covid-19 crisis deepened in the second quarter of 2020. After a low point in April, volume started to gradually recover into June as lockdowns were lifted around the world and customers restored depleted inventories.
Beer volume was most affected in the Americas and Africa, the Middle East and Eastern European regions with a “mid-teens” decline due to full lockdowns in Mexico and South Africa followed by Europe with a “high-single digit” decline whilst Asia Pacific showed the highest resilience driven by Vietnam.
In Europe off-trade beer volume grew “in the mid-teens” and market share increased in key markets, claims the brewer. However, given Heineken’s strong position in the on-trade and the structural differences between channels, operating profit was disproportionally affected as on-trade outlets were closed for a large part of the second quarter.
Operating profits declined organically by 52.5% compared to H1 2019 while net profit declined by 75.8% in H1. Heineken nv’s exceptional items will include around €550 million of impairments on tangible and intangible assets which will lead to a reported net loss of around €300 million.
Input costs per hectolitre increased significantly and from late March onwards, Heineken took significant cost mitigation actions leading to an overall decrease in costs for the first half of 2020. The company is committed to further intensify its focus on costs.
The Heineken brand itself performed well in relative terms suffering only a 2.5% overall decline. And the brand even experienced double-digit growth in 14 markets including Brazil, China, the UK, Poland, Germany, Ivory Coast and South Korea. Heineken 0.0 also experienced a double-digit increase in sales with growth across all regions. This was particularly the case in the US and Mexico.
