Heineken cheers EU-US trade deal as tariff problems hit shares
The world's No.2 brewer exports beer, especially its namesake lager, to the U.S. from Europe and Mexico, and has also suffered from the indirect impact on consumer confidence in key markets like Brazil.
Nevertheless, it reported a 7.4% increase in organic operating profit in the first half of the year, versus analyst expectations of 7%, crediting growth in once-difficult regions like Africa and Asia as well as cost savings.
Heineken's shares fell 4.3% as the brewer cautioned on softer volumes for the remainder of the year as U.S. policies, especially on trade, disrupt markets in the Americas.
CEO Dolf van den Brink welcomed the certainty brought by the trade deal clinched on Sunday, which reduced a threatened 30% U.S. tariff on EU goods to 15% - a rate that would still hit Heineken's U.S. profits.
All options are being considered to mitigate tariffs long-term, including shifting manufacturing, he said, but added that such moves were capital intensive and would first need more consistency in policy.
"We look at all options from ... continuing with our current setup, a more hybrid version, or otherwise," he told journalists on a call. "If and when we deem them financially to be more attractive in the mid- to long-term, we would for sure explore them."
LINGERING TARIFF FEARS, ECONOMIC UNCERTAINTY
Heineken still faces U.S. tariffs of up to 30% on products it produces in Mexico unless the Mexican government can reach an agreement with Washington ahead of an August 1 deadline.
Executives told journalists that since the first quarter, Heineken has also seen economic uncertainty hit spending and confidence in the U.S., Brazil and Mexico.
In Mexico, remittances from the U.S. have fallen significantly, impacting beer industry sales. And U.S. Hispanic consumers were also spending less, van den Brink said.
Heineken continues to expect annual profit growth of between 4% and 8%.
The company also beat forecasts for second quarter revenue and volume, with growth in markets like Vietnam and India, and increased an annual cost-saving goal by a quarter to 500 million euros ($586 million).
"They have slightly downgraded their volume guidance...given everything going on in the world...that to me doesn't feel like a terrible outcome," said Ryann Dean, global analyst at Heineken investor Aylett Fund Managers.
Heineken's strong growth in markets like India and China, and consistent profitability, more than offset this, he continued, adding that emerging markets would drive Heineken's long-term volume growth.
($1 = 0.8535 euros) (Reporting by Emma Rumney; Editing by Lincoln Feast and Joe Bavier, Kirsten Donovan)
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