Heineken(HEINY) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved a net revenue growth of 6% organically, reaching €14.8 billion, with a net profit increase of 4.4% to €1.2 billion [3][12][140] - Operating profit (beia) grew by 12.5%, with a margin of 14%, up 60 basis points compared to the previous year [102][112] - Free operating cash flow recorded an inflow of €655 million, a €1.1 billion increase from last year, primarily due to working capital improvements [17] Business Line Data and Key Metrics Changes - The Heineken brand saw a volume growth of 9.2%, with 27 markets achieving double-digit growth, particularly in Brazil, China, and Vietnam [3][107] - The non-alcoholic beer and cider portfolio grew close to 10%, with Heineken 0.0 being a significant contributor [4][9] - In the Americas, net revenue grew by 4%, with operating profit (beia) increasing by 37%, driven by top-line growth and improved variable expenses [27][14] Market Data and Key Metrics Changes - In Ethiopia, revenue grew in the mid-teens despite a volume decline due to inflation [5] - The U.S. market outperformed, with Heineken's brand power improving, particularly with Heineken Silver and Heineken 0.0 [6] - In India, volume increased by high single digits, with the premium portfolio growing in the 30s [7] Company Strategy and Development Direction - The company continues to focus on its EverGreen transformation strategy, aiming for balanced growth between volume and value [2][11] - There is a strong emphasis on premiumization, digital initiatives, and sustainability, with significant investments planned for the second half of the year [38][142] - The company aims to maintain competitiveness in challenging markets, particularly in Africa and the Middle East, while adapting its portfolio [29][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing volatility in consumer confidence and economic sentiment, particularly in developed markets [18] - The outlook for organic net profit growth has been revised to align more closely with expected operating profit growth [20] - Management expressed confidence in the long-term potential of key markets like Nigeria, despite short-term challenges [118] Other Important Information - The company recorded a non-cash impairment of €874 million due to the decline in the share price of China Resources Beer [37] - The interim dividend is set at €0.69 per share, consistent with the previous year [36] - The effective tax rate (beia) is expected to be around 28%, an improvement from previous guidance [39] Q&A Session Summary Question: Guidance range and assumptions - Management narrowed the guidance range for organic net profit growth to 4% to 8%, reflecting confidence in the normalization of top-line performance [21][122] Question: Competitive landscape in Brazil and South Africa - Management noted a price war in the economy segment in Brazil but emphasized growth in the premium segment, particularly for the Amstel brand [50][51] Question: Margin pressure in Vietnam - Management acknowledged challenges in Vietnam but highlighted efforts to balance the portfolio and improve margins over time [56][58] Question: Impact of marketing and promotional activities - Management discussed the importance of disciplined investment in marketing to support brand power and pricing power, particularly in developed markets [121][91] Question: Balance sheet and potential cash returns - Management indicated a focus on maintaining a healthy balance sheet while prioritizing organic growth and sustainability investments before considering share buybacks [88]