By Philip Blenkinsop
BRUSSELS (Reuters) -Heineken NV on Monday posted higher-than-expected first-half earnings, as consumers bought more beer despite inflationary pressures, but the world’s second-largest brewer shelved its margin target for 2023 as costs spiked.
The brewer of Heineken, Europe’s top-selling lager, as well as Tiger, Sol and Strongbow cider, sold more beer than expected, with expansion in all regions and revenue and profit above market consensus.
CEO Dolf van den Brink told Reuters that the beer market appeared very resilient, with no sign so far that high inflation was curbing drinking.
Heineken repeated its outlook that its margin would be stable or increase modestly this year. For 2023, it said its objective now was for a mid- to high-single-digit percentage increase in operating profit.
Heineken previously set a target to raise its operating margin to 17% in 2023, but it had already cast doubt on reaching that due to sharply higher input costs. The market expectation before Monday’s results was 16%.
Chief Financial Officer Harold van den Broek said current spikes in the cost of inputs such as barley or aluminium would remain a factor in 2023, despite slightly softening recently, given hedging 12-18 months ahead.
He added the company was carrying out an assessment to ensure it could operate without natural gas in the event that Russia cuts off supply.
Heineken shares fell as much as 3.5% in early trading, but were down a more modest 0.9% at 95.26 euros at 0800 GMT, still 12% above a late June low.
Many analysts stressed the strong first-half numbers, but Barclays said it was downgrading its guidance, given it had expected higher operating profit growth in 2023.
Trevor Stirling, beverage analyst at Bernstein, said a stronger-than-expected performance in 2022 should outweigh the 2023 caution.
For the first half, Heineken reported a 24.6% rise in operating profit before one-offs to 2.16 billion euros ($2.21 billion), beating a consensus of a 17% increase in a company-compiled poll.
Heineken reported a 7.6% rise in beer volume, with an acceleration in the second quarter and expansion in all regions, notably the Asia-Pacific as it recovered from COVID-19 lockdowns, and solid performance in Americas and Europe, where more consumers were drinking at bars or restaurants.
Heineken, like market leader Anheuser-Busch InBev last week, said it benefited from price hikes and consumers shifting to more expensive “premium” beers, such as the Heineken brand in major markets Brazil, China and Vietnam.
($1 = 0.9783 euros)
(Reporting by Philip Blenkinsop; additional reporting by Joice Alves in London and Elena Vardon in Gdansk; editing by Uttaresh.V and Jason Neely)