Heineken sees profits rise but issues warning over soaring commodity costs
eineken has become the latest company to warn soaring commodity costs will hit margins, as it reported higher-than-expected profits.
The world‘s second-largest brewer – whose brands include Amstel, Birra Moretti and Bulmers – said underlying operating profit rose 109.3% to €1.6 billion (£1.36 billion) in the first half, ahead of consensus of €1.23 billion. Net revenue rose 14.1% on an organic basis to almost €10 billion as bars reopened across much of the world.
Like fellow brewer AB InBev, drinks group Diageo and consumer giants Unilever and Reckitt, Heinken is facing soaring costs for key raw materials such as aluminium, and ongoing logistics cost inflation.
Last week Unilever said its costs were soaring faster than at any point over the last decade, and on Monday Heineken said it expects to see a “material impact” on profit next year as a result of the rise in commodity costs.
Bosses plan to “be assertive on pricing”, boost productivity and manage costs to offset the inflation, but said they expect margin pressure to intensify in the second half. The company will also invest in marketing.
Chief Executive Dolf van den Brink, who took the helm last year, said FY21 results are expected to remain below pre-pandemic levels. Latest restrictions in key Asian markets, and in South Africa, are hitting sales.
Heineken has said it plans to make €2 billion (£1.75 billion) of cost savings by 2023.
The firm revealed in February that it would axe 8,000 jobs – nearly one in 10 of its 85,000 strong global workforce — after reporting a net loss of €204 million (£178 million) in 2020, down from a €2.2 billion (£1.93 billion) profit in 2019.
Revenues decreased by nearly 17% to €23.8 billion in the year as pandemic-induced lockdowns shut bars and pubs around the world for long periods, and organic beer volumes sold shrank by 8.1%.
Hargreaves Lansdown’s William Ryder said that “in an inflationary environment brand strength will be more important than ever” for Heineken.
Shares remained broadly flat on Monday morning.