NETHERLANDS – Heineken, the second-largest beer company in the world, has reported a below-expectation financial performance in the first half of 2023 primarily driven by challenging results in its most profitable APAC region.

Net profit slumped 8.6 percent to €589 million (US$649 million), despite a 6.3% jump in revenue due to higher pricing.

In the first half, Heineken sold 5.6% less beer than a year ago. Over half of the drop was due to Vietnam and Nigeria where price increases and a challenging economic backdrop led to a 7.6% organic decline in Q2.

“We have taken the vast majority of our pricing in the first half. That was deliberate and by design. That of course impacted to some extent the volume performance in the first half, but in the second half, we see that effect moderating,” Chief Executive Dolf van den Brink told Reuters.

In Nigeria, the Dutch company said it has continued to right-size its cost base lowering the break-even volume threshold of Nigerian Breweries by 20%, a major step in helping the business mitigate the challenging economic conditions and providing a significant opportunity in periods of growth.

Beer volumes in the Asia-Pacific region fell by 13.2% with more expensive premium beers down by even more. Beer volume in Europe performed broadly in line with the company’s expectations for the first six months, while the Americas region was impacted by a soft beer market, notably in the second quarter.

The group’s premium beer volume declined by 6.5%, driven by Vietnam and Russia. Outside these markets, premiumization trends remain strong as premium volume grew by a low single digit, ahead of the total beer portfolio in aggregate and in more than half of the markets.

The non-alcoholic beer and cider portfolio grew volume by a mid-single-digit. Heineken 0.0 continued to grow, up by a mid-single-digit excluding Russia, and double-digit growth in Brazil and the USA.

The Low & No-Alcohol (LONO) portfolio volume was stable for the first half, with double-digit growth in 15 markets including Brazil, Mexico, Spain, Panama, and Bulgaria, offset by declines in Nigeria, France, Poland, and Germany.

Following the acquisition of Distell in South Africa, Heineken’s overall volume of flavored beer and beyond beer alcoholic propositions grew to 6.8 million hectolitres in the first half.

The brewer said its digital platforms captured €5.2 billion (US$5.74bn) of gross merchandising value, an increase of 36% compared to last year.

Giving an update on its stand in Russia, Heineken said the recent developments in the country have demonstrated that it is even more challenging for businesses to secure exit approval.

The company revealed that it does not accept any financial gain from the ongoing operations, will not profit from the sale of the business, and has taken an impairment loss to date of €201 million (€88 million in December 2022 and €113 million in June 2023) bringing the net carrying value to nil as of 30 June 2023.

For the full year, the owner of Tiger and Sol brands expects pricing to moderate with volume trends, gradually improving to a low-single-digit decline.

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