October 22, 2014 / 6:18 AM / 3 years ago

Wet European summer dampens Heineken beer sales

4 Min Read

A plastic container with empty bottles of Heineken beers are pictured among beer kegs outside a restaurant in Singapore August 29, 2012.Tim Chong

BRUSSELS (Reuters) - Heineken (HEIN.AS), the world's third-largest beer maker, reported lower than expected sales in the third quarter as Europeans drank less during a wet summer, but kept its forecast of improved profitability this year.

The Dutch brewer, which makes Europe's best-selling Heineken lager as well as Sol, Tiger and Strongbow cider, said beer sales were barely changed in the July-Sept period with declines in both eastern and western Europe, but increases elsewhere.

Heineken nevertheless repeated it expects its full-year margin - or profitability - to expand by more than its 40 basis point target after a strong first half, cost cuts and expected solid sales in large markets in December.

Heineken shares were down 1.6 percent at 57.23 euros at 1056 GMT, making them the weakest performers in the STOXX European food and beverage index .SX3P.

Still, it has outperformed peers this year, rising 16.4 percent since the end of 2013, compared with 8.7 percent for top brewer Anheuser-Busch InBev (ABI.BR), 8.9 percent for No. 2 SABMiller SAB.L and 12.4 percent for Carlsberg CARLb.CO

"It's a small miss, primarily in central and eastern Europe where there are relatively low margins," said Trevor Stirling, analyst at Bernstein Securities, which does not hold shares in the company and rates it "outperform".

"In Africa, the Americas and Asia-Pacific, it was more in line and they are high-growth, high-margin markets."

The world's top brewers are relying on emerging markets such as Latin America, Asia and Africa for growth amid subdued consumer spending in slowly recovering Europe and limited U.S. expansion.

Still, even developing world consumers drink less when it rains. Heineken said beer sales in Nigeria were stable due to a prolonged wet season.

SABMiller last week reported lower volumes in the July-Sept period due to a poor summer in China.

World Cup Boost

Heineken is the market leader in Europe, responsible for half of group revenue and about a third of its operating profit in the first half, although it has significant exposure to Africa, Latin America and Asia.

It had said that volume growth and revenue per hectoliter would be lower in the second half after a solid first six months helped by the soccer World Cup, good weather and deep cost cuts.

In the third quarter, the brewer sold less in western Europe during an exceptionally wet August, a normally key summer drinking month. In eastern Europe, Russian laws on alcohol sales and a weakening economy and competitor price pressure in Poland, compounded the impact of poor weather.

Growth was greatest in the Asia-Pacific region, with wide-spread expansion and strong volume increases of its Tiger brand in Vietnam and Malaysia.

"We believe that Q3 has been heavily influenced by the weather....(but) that doesn't change our fundamental view on the second half," Chief Financial Officer Rene Hooft Graafland told an investor conference call.

"Q4 and especially December is a key month for Mexico, Nigeria, for the UK December is also a key month."

Third-quarter consolidated revenue rose 0.2 percent on a like-for-like basis to 5.10 billion euros ($6.49 billion), below the average 5.32 billion euro forecast in a Reuters poll of 10 analysts. Net profit was lower year-on-year.

Buying other brewers has been a clear avenue of growth, although Heineken's controlling family last month rebuffed a takeover approach from world number two SABMiller.

Hooft Graafland said that more market consolidation was nevertheless likely and that the Dutch brewer intended to play an active role.

Reporting By Philip Blenkinsop; editing by Robert-Jan Bartunek and Susan Thomas

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