Heineken N.V. reports full year 2014 results

Strong profit growth, delivering on strategic priorities

Amsterdam, 11 February 2015 - Heineken N.V. today announced:

  • Group revenue grew 3.3% organically, with group revenue per hl up 1.4%
  • Heineken® premium volume +5.1% with growth across all regions
  • Innovation rate accelerated further to 7.7% contributing €1.5 billion of revenues
  • Group operating profit (beia) up 7.8% organically
  • Consolidated Operating profit (beia) margin expansion of 90bps, ahead of medium term target level
  • Net profit (beia) of €1,758 million, 14% higher organically
  • Diluted EPS (beia) of €3.05 (2013: €2.75) including a 6 cent adverse currency impact
  • Dividend policy pay-out ratio widened to 30%-40% (from 30%-35%) of Net profit (beia); proposed 2014 total dividend €1.10 per share (2013: €0.89), implying a 36% pay-out ratio (2013: 32%)


Jean-François van Boxmeer, Chairman of the Executive Board & CEO, commented:
"Our strong performance reflects the success of our strategy.  We continued to invest in our portfolio of brands and we have significantly improved our commercial execution.  We combined this with compelling consumer marketing and a powerful innovation agenda which contributed €1.5 billion to our revenues.  As a result, Heineken® premium volume grew 5.1% and a number of our global brands achieved double digit growth. We remain committed to our medium term margin guidance, underpinned by a continued focus on efficiency and further cost savings.  Whilst we expect further volatility in emerging markets and deflationary pressures in 2015, we are confident that we will deliver further top and bottom line growth in the year ahead."


Key financials3
 (in mhl or € million unless otherwise stated)
 FY14  FY131 Total
Group revenue 21,191 21,174 0.1 3.3
Group revenue/ hl (in €) 91 92 -0.9 1.4
Group operating profit (beia) 3,359 3,192 5.2 7.8
Group operating profit (beia) margin 15.9% 15.1% +80bps  
Consolidated revenue 19,257 19,203 0.3 3.0
Consolidated operating profit (beia) 3,129 2,941 6.4 8.7
Consolidated operating profit (beia) margin 16.2% 15.3% +90bps  
Net profit (beia) 1,758 1,585 11 14
Net profit 1,516 1,364 11  
Diluted EPS (beia) (in €) 3.05 2.75 11  
Free operating cash flow 1,574 1,518 3.7  
Net debt/ EBITDA (beia) 2 2.5x 2.6x    

1 As disclosed with the H1 results on 20 August 2014 Group Revenue in 2013 was restated to correctly reflect HEINEKEN share of JV and associates predominantly in AME
2 Includes acquisitions and excludes disposals on a 12 month proforma basis
3 Refer to Definitions and Glossary sections for an explanation of non IFRS measures and other terms used throughout this report

(Based on consolidated reporting)
In 2015 HEINEKEN expects a continued challenging external environment, however, delivering on its strategic priorities is expected to drive further organic revenue and profit growth.

Continued revenue growth: HEINEKEN expects positive organic revenue growth in 2015 with volume growth at a more moderate level than 2014, and weighted towards H2 (tougher comparatives in H1).  Continued volume growth in developing markets will offset more subdued volume growth elsewhere. Revenue per hectolitre is expected to increase driven by revenue management. Pricing will be limited by deflationary and off premise pressure in some markets.

Increased commercial investment: HEINEKEN will continue its targeted higher commercial investments across the regions, and expects a slight increase in marketing and selling (beia) spend as a percentage of revenue in 2015 (2014: 12.7%).

Continued cost savings: HEINEKEN is committed to delivering further cost savings and will continue its focus on driving cost efficiencies across the company. These are an important driver of the medium term margin guidance. As a result of ongoing productivity initiatives, HEINEKEN expects an organic decline in the total number of employees in 2015.

Input cost prices are expected to be slightly lower in 2015 (excluding a foreign currency transactional effect).

Further margin expansion: HEINEKEN continues to target a year on year improvement in consolidated operating profit (beia) margin of around 40bps in the medium term. This will continue to be supported by tight cost management, effective revenue management and the anticipated faster growth of higher margin developing markets. In 2015 consolidated operating profit (beia) margin will be adversely impacted by approximately 25bps from the disposal of EMPAQUE, the Mexican packaging business, announced on 1 September 2014 and expected to complete in Q1.  HEINEKEN expects to partially but not fully offset this, such that in 2015 consolidated operating profit (beia) margin expansion will be somewhat below the 40bps medium term level.

Foreign currency movements: Assuming spot rates as of 6 February 2015, the calculated positive currency translational impact on consolidated operating profit (beia) would be approximately €130 million, and €80 million at net profit (beia). However the foreign exchange markets are very volatile.

Improved financial flexibility: HEINEKEN remains focused on cash flow generation and disciplined working capital management, with a commitment to a long-term target net debt/ EBITDA (beia) ratio of below 2.5x. In 2015, capital expenditure related to property, plant and equipment is expected to be approximately €1.6 billion (2014: €1.5 billion). A cash conversion ratio of below 100% is expected in 2015 (2014: 79%).

Interest rate: HEINEKEN forecasts a stable average interest rate of c.3.7% in 2015 (2014: 3.7%)

Effective tax rate: HEINEKEN expects the effective tax rate (beia) for 2015 to be broadly in line with the prior year (2014: 29.7%).


Despite an increasingly volatile global macroeconomic backdrop HEINEKEN delivered healthy organic revenue and operating profit growth in 2014. As expected growth was more moderate in H2, with group revenue and group operating profit (beia) on an organic basis, up 2.1% and 3.6% respectively. The deliberate strategy of higher commercial investments to enhance brand equity and drive effective execution in the marketplace delivered further market share gains across key markets. Innovation was an important competitive advantage. HEINEKEN continues to invest early in key developing growth markets, and added capacity in several countries including Ethiopia, Cambodia, China, Vietnam and Indonesia. A continued focus on revenue management and disciplined cost management delivered improved revenue per hectolitre as well as operating margin expansion.

Notably at the recent Cannes Lions International Festival of Creativity the Company won the prestigious 'Marketer of the Year' award for 2015. This is a tribute to HEINEKEN's strong momentum in brand management, innovation and creativity.

Organically group revenue grew 3.3%, benefiting from both positive pricing and positive sales mix, driving a 1.4% increase in group revenue per hectolitre. Organically, group beer volume was 2.0% higher for the full year, stronger in H1 due to favourable weather and the football World Cup and a soft comparable prior period. Most regions in H2 saw softer group volume growth due to unseasonably wet weather particularly in Europe combined with tough Q3 comparatives. However, in Asia Pacific volume growth was higher in H2, recovering from pressure in H1 from higher excise duties.

Group operating profit (beia) grew 7.8% on an organic basis, benefiting from higher revenues and improved cost efficiencies partly offset by higher marketing and selling expenses. Group operating profit (beia) in developing markets grew 10% organically, reflecting strong profit contributions from Mexico, Nigeria, Brazil and Vietnam, partly offset by lower profitability in Poland and Compañía Cervecerías Unidas S.A. (CCU). Group operating profit (beia) margins expanded by 80 basis points to 15.9%.

(in mhl or %)
 4Q14  Organic
 FY14  Organic
Heineken® in premium segment 7.5 4.4 29.5 5.1
Africa Middle East 1.1 7.1 3.8 7.8
Americas 2.3 3.4 8.9 4.0
Asia Pacific 1.7 3.8 6.3 1.5
Central & Eastern Europe 0.6 6.5 2.5 5.5
Western Europe 1.8 3.8 8.0 7.8

Heineken® volume in the premium segment grew by 5.1% in 2014 and by 4.4% when excluding the January 2013 excise related destocking effect in France. The brand saw positive growth across all regions, with particularly strong double digit growth in Brazil, China, France, the UK and Mexico. The brand was also strong in Spain, Taiwan, Thailand, Russia, Singapore and Germany, with positive growth more than offsetting weaker brand volumes in Vietnam and Greece. Encouragingly in the U.S. Heineken® regular delivered positive volume growth in Q4, in addition to seeing improved Heineken® Light trends in this market. 'The City' campaign launched in May positively enhanced brand equity, combined with continued brand activation through innovation and social media.

Volume of the global brands Desperados, Affligem and Sol Premium delivered double digit growth in the year, reflecting the successful focus of the broader premium portfolio strategy. Desperados, the high margin tequila-flavoured beer, saw volumes up 19%, with particularly strong growth in the UK, France, Poland and Brazil. The brand is now available in 85 markets. Affligem, the Belgian abbey beer brand, delivered volumes up 16%, with strong growth in Western Europe, particularly in France. Affligem is currently available in 31 markets with further roll outs planned in 2015. The UK, Brazil, New Zealand and CCU markets were key drivers of Sol Premium volume growth, which was up firmly double digits.

Cider volumes were broadly stable for the full year with gains across several focus markets offset by lower volume in South Africa. During the year HEINEKEN expanded its cider brand portfolio, with the addition of Strongbow and Bulmers flavour extensions and the introduction of Old Mout and Blind Pig in the UK and Cidrerie Stassen in Belgium. In the USA, the launch of Strongbow Gold Apple and Honey & Apple hard ciders contributed to strong cider growth momentum in the country.

HEINEKEN's focus on innovation delivered €1.5 billion revenue and the innovation rate increased to 7.7%, considerably ahead of the 5.9% rate in 2013 and above the 2020 6% target. The company's worldwide scale supported the roll out of global and local brand innovations across multiple markets, with offerings addressing the important theme of moderation and also improving the quality of the draught offer. 'Radler' beers which are now present in 41 markets (31 in 2013) across all 5 regions continue to be an innovation highlight, with the launches of the 2% and 0.0% variants as well as new flavours all driving positive growth. THE SUB®, the draught beer appliance to capture share in the growing at home draught beer market, was launched in 4 markets and is already showing positive signs.
With an exciting pipeline for the coming year, we are confident on continuing the strong innovation momentum, and firmly view innovation as a key competitive advantage.

HEINEKEN announced with H1 results that the TCM 2 cost savings program had completed ahead of schedule and delivered above the original target (€637 million compared to target €625 million). The company continues to realise further ongoing productivity improvements across the global supply chain function, as well as focusing on rightsizing and restructuring initiatives to optimise the cost structure.

Global Business Services continues to leverage global scale and deliver cost savings. HEINEKEN Global Procurement (HGP) is delivering considerable cost benefits through the central negotiation and purchasing of both product and non-product related spend areas. Similarly, the transition of the transactional finance activity to HEINEKEN Global Shared Services (HGSS) supports primarily cost efficiencies. At the end of 2014, 22 European operating companies had successfully completed the transition to HGSS. HEINEKEN is currently expanding the scope of activities carried out by HGSS, primarily related to order to cash and standard reporting activities. All operating companies in Europe will have transitioned these further activities to HGSS by the end of 2015.

At the end of 2014 upfront cumulative GBS costs incurred were €203 million, in line with budget, of which €160 million was recognised as an operating expense and €43 million capitalised.


Following the strong results of 2014 and to reflect confidence in future strong and sustainable cash flow generation HEINEKEN has decided to widen the pay-out ratio for its annual dividend from 30%-35% to 30%-40% of Net profit (beia).  For 2014 a payment of a total cash dividend of €1.10 per share of €1.60 nominal value for 2014 (total dividend 2013: €0.89) will be proposed at the forthcoming AGM. If approved, a final dividend of €0.74 per share will be paid on 6 May 2015, as an interim dividend of €0.36 per share was paid on 2 September 2014. The payment will be subject to a 15% Dutch withholding tax. The ex-final dividend date for Heineken N.V. shares will be 27 April 2015.

Organic growth excludes the effect of foreign currency translational effects, consolidation changes, accounting policy changes, exceptional items and amortisation of acquisition-related intangibles. Beia refers to financials before exceptional items and amortisation of acquisition-related intangibles. Group figures include HEINEKEN's attributable share of joint ventures and associates. The license fee for the Heineken® brand has been increased since 1 January 2014. To facilitate a meaningful financial and margin comparison compared to last year, the regional impact is reported as a consolidation change in 2014.

Media   Investors
John Clarke   Sonya Ghobrial
Head of External Communication   Director of Investor Relations
Christine van Waveren   Aarti Narain / Gabriela Malczynska
Financial Communications Manager   Investor Relations Manager/Analyst
E-mail: pressoffice@heineken.com   E-mail: investors@heineken.com
Tel: +31-20-5239355   Tel: +31-20-5239590
Trading update for Q1 2015   22 April 2015
Annual General Meeting (AGM)   23 April 2015
Half Year 2015 Results   3 August 2015
Trading update for Q3 2015   28 October 2015

Conference call details
HEINEKEN will host an analyst and investor conference call in relation to its full year 2014 results today at 10:00 CET/ 9:00 GMT. The call will be audio cast live via the Company's website: www.theheinekencompany.com/investors/webcasts. An audio replay service will also be made available after the conference call at the above web address.

Analysts and investors can dial in using the following telephone numbers:
Netherlands   United Kingdom
Local line: +31(0)20 716 8257   Local line: +44(0)20 3427 1914
National free phone: 0800 020 2577   National free phone: 0800 279 4841
United States    
Local line: +1646 254 3362    
National free phone: 1877 280 2342    
Participation/ confirmation code for all countries: 1910072

Editorial information:
HEINEKEN is the world's most international brewer. It is the leading developer and marketer of premium beer and cider brands. Led by the Heineken® brand, the Group has a powerful portfolio of more than 250 international, regional, local and specialty beers and ciders. We are committed to innovation, long-term brand investment, disciplined sales execution and focused cost management. Through "Brewing a Better World", sustainability is embedded in the business and delivers value for all stakeholders. HEINEKEN has a well-balanced geographic footprint with leadership positions in both developed and developing markets.  We employ 81,000 people and operate more than 160 breweries in 70 countries.  Heineken N.V. and Heineken Holding N.V. shares trade on the NYSE Euronext in Amsterdam. HEINEKEN has two sponsored level 1 American Depositary Receipt (ADR) programmes: Heineken N.V. (OTCQX: HEINY) and Heineken Holding N.V. (OTCQX: HKHHY). Most recent information is available on HEINEKEN's website: www.theHEINEKENcompany.com and follow us via @HEINEKENCorp.

This press release contains forward-looking statements with regard to the financial position and results of HEINEKEN's activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond HEINEKEN's ability to control or estimate precisely, such as future market and economic conditions, the behaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquired businesses and achieve anticipated synergies, costs of raw materials, interest-rate and exchange-rate fluctuations, changes in tax rates, changes in law, pension costs, the actions of government regulators and weather conditions. These and other risk factors are detailed in HEINEKEN's publicly filed annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only relevant as of the date of this press release. HEINEKEN does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of these statements. Market share estimates contained in this press release are based on outside sources, such as specialised research institutes, in combination with management estimates.