Heineken(HEINY) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net revenue growth of 5.5% organically, reaching €30.3 billion, with net revenue per hectoliter increasing by 10.8% while total beer volume declined by 4.7% [29][48] - Operating profit before interest and tax (beia) grew by 1.7% to €4.4 billion, with three out of four regions delivering profit growth [3][78] - Net profit beia declined by 4.3% to €2.63 billion, impacted by higher interest and financing expenses [30][83] - The diluted EPS ended at €4.67, with a stable dividend per share proposed at €1.73 [55][30] Business Line Data and Key Metrics Changes - The Heineken brand achieved a volume growth of 3.4%, excluding Russia, with operating profit beia margin at 14.7%, down 100 basis points from the previous year [3][25] - In Africa and the Middle East, net revenue grew organically by 11.6%, despite a beer volume decline of 6.3%, offset by a strong price/mix growth of 17.4% [6][7] - The Americas saw a net revenue growth of 7.4%, with stable beer volume and an operating profit beia growth of 6.2% [9][51] - APAC faced challenges with a net revenue decline of nearly 6% and a beer volume decrease of 10.4%, primarily due to Vietnam [12][24] Market Data and Key Metrics Changes - In Europe, net revenue grew by 6.3%, with a price/mix increase of 11.7%, while beer volume declined by 5.4% [15][16] - Brazil demonstrated strong growth momentum, with beer volume increasing by low single digits, outperforming the market [37][38] - China became the second-largest market for the Heineken brand globally, with a volume increase of 4.5 times since 2019 [40][41] Company Strategy and Development Direction - The company aims for superior balanced growth, focusing on volume and value growth, continuous productivity, better capital efficiency, and sustainability [2][28] - The EverGreen strategy emphasizes long-term value creation through digital transformation, productivity improvements, and sustainability initiatives [28][90] - The company plans to invest significantly in marketing and sales to restore growth momentum in 2024 [68][76] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2023 was a pause year but expressed confidence in restoring growth momentum in 2024 [93][66] - The macroeconomic environment and geopolitical developments are expected to remain uncertain, impacting business operations [62][91] - The company anticipates a low to high single-digit organic growth in operating profit for 2024, depending on external factors [92][90] Other Important Information - The company achieved cumulative gross savings of €2.5 billion since the start of the EverGreen strategy, exceeding the initial target [52][134] - A noncash impairment charge of approximately 16% of the carrying amount of Heineken Beverages was recorded due to external factors [58][87] - The company is committed to sustainability, aiming for 43% of volumes sold in reusable formats by 2030 [20][46] Q&A Session Summary Question: What are the biggest milestones passed in 2023? - Management highlighted the successful integration of Distell and operational improvements in challenging markets like India and Nigeria [72][125] Question: What is the outlook for volume growth in Europe? - Management expressed cautious optimism, noting that while there are positive indicators, significant recovery in key markets like Nigeria and Vietnam is still needed [130][131] Question: What is holding back share buybacks despite a favorable net debt-to-EBITDA ratio? - The company prioritizes maintaining its dividend policy and investing in organic growth before considering share buybacks [107][130] Question: How will the company manage pricing in a lower cost environment? - Management indicated that they have concluded most pricing negotiations for 2024 and are confident in maintaining competitiveness [115][116] Question: What are the expectations for gross margin recovery? - Management believes that with a more stable inflationary environment, gross margin recovery is possible, but it is too early to make firm commitments [99][100]