Heineken NV reported a jump in interim profit versus the first half of last year, but the world’s second-largest brewer warned that its performance continues to be affected by COVID-19 and that rising commodity costs will have a significant impact next year.
The Dutch brewer still expects its full-year results to remain below 2019’s pre-pandemic figure.
“COVID-19 remains a factor, with the biggest impact currently in key markets in Asia and Africa,” said chairman and chief executive Dolf van den Brink. “Secondly, we see a rise in commodity costs, which, at current levels, will start affecting us in the second half of this year and have a material effect in 2022.”
Net revenue, before exceptional items and amortization, was down 12.9% from the first half of 2019.
“The COVID-19 pandemic continues to present challenges for the world with the biggest impact for our business currently in Asia,” said the brewing giant. “We expect the rest of the year will continue to be volatile, with some markets gradually recovering while others continue to implement restrictions until vaccinations are more broadly rolled out.
“Furthermore, we expect headwinds in input costs in the second half of 2021 and a material impact from commodity costs in 2022. We will be assertive on pricing and drive revenue and cost management to face this challenge; however we expect margin pressure to intensify in the second half.
“As a consequence, we expect operating profit margin [before exceptional items and amortization] to be lower in the second half compared with the second half of last year.”
Interim net profit, before exceptional items and amortization, jumped 320.3% organically from 2020 to €896mln.
“The recovery is getting underway at Heineken, and most of the numbers look much merrier than they did in 2020 when COVID first struck,” said William Ryder, equity analyst at Hargreaves Lansdown. “However, the regional picture is more mixed, and it really depends how the timing of the various COVID waves has worked out.”
“The overall direction of travel looks positive though, and if the current wave stays under control in the UK it will augur well for other countries who may be a few steps behind.”
Ryder also commented on the group’s warning regarding margins and cost inflation.
“This is starting to become a pattern across a few industries, although it’s still not clear how much is temporary COVID disruption and how much is genuine underlying inflation.
“Either way, Heineken is adopting an “assertive” pricing strategy, but nonetheless expects margins to come under pressure. This is something to watch, and in an inflationary environment brand strength will be more important than ever.”