Dutch brewing giant Heineken NV increased first-half profit by 35 percent after raising prices and acquiring Foster's lager and Strongbow cider in the breakup of Scottish & Newcastle Plc.
Net income was 407 million euros (US$600 million), up from 302 million euros a year earlier, the Amsterdam-based company said yesterday. Sales gained 17 percent to 6.41 billion euros.
Heineken lifted prices in Western Europe, its biggest market, by 4 percent in the half to recoup higher expenses for barley, aluminum and energy. Profitability still fell in the region as economies weakened and smoking bans drove drinkers away from bars. The brewer bought S&N assets in the United Kingdom, Portugal and Belgium to gain scale for cost cuts.
"Heineken is managing to pass on raw material costs, which is important," said Nico van Geest, an analyst at Keijser Securities NV in Amsterdam. "Companies can raise prices, but the question remains what it does to volume. In Heineken's case, it's not too bad."
Excluding 134 million euros of one-time costs, including a reorganization in France, profit would have been 541 million euros, Bloomberg News calculations show. That met the 540-million-euro median estimate of seven analysts Bloomberg News surveyed.
Chief Executive Officer Jean-Francois van Boxmeer said the brewer raised its share of the global "international premium" beer market, defined as brews with prices about 35 percent above average, to more than 20 percent during the half.
The Netherlands' biggest brewer said last week that S&N, whose assets were divided between Heineken and Denmark's Carlsberg A/S this spring, won't necessarily boost earnings in 2009 as consumer confidence in Europe falls and interest rates rise. The acquired assets were included in Heineken's results from May 1.
Heineken's more expensive beers include the Asia-Pacific region's Tiger and Heineken Premium Light, sold in the United States. The company said on a conference call earlier that the US import market was "stable."
Sales of such labels rose in all regions except North and South America, as the US market became "more competitive," van Boxmeer said yesterday at a press conference in Amsterdam.
The brewer said yesterday that so-called organic net income will increase by at least "mid-single digits" for 2008. That basis excludes potential acquisitions or divestments, currency movements, one-time items, amortization and accounting changes.
"The outlook for 2008 is very cautious," Rabo Securities analysts Karel Zoete and Patrick Roquas said in a note to investors. Commodity costs increased 15 percent in the first half and will probably rise at the same rate in the second half, the brewer said. Operating profit as a percentage of sales dropped to 10.7 percent from 12.3 percent a year earlier, while Western European volumes fell 1.3 percent.
