Heineken reports net loss due to write-down of stake in Chinese brewery
The world's second-largest brewing company falls into a net loss after writing down its investment in China.
Heineken, the world's second-largest brewing corporation, reported a net loss in the first half of the year due to a write-down of its stake in a Chinese brewery. This news caused the Dutch company's shares to fall by 7 percent.
Heineken's revenue rose by 2.2 percent to 17.8 billion euros in the first half of the year, while operating profit before special items and amortizations increased by 12.5 percent to 2 billion euros. Despite these positive figures, beer sales volume disappointed with an increase of only 2.1 percent, whereas analysts had expected a growth of 3.4 percent.
Heineken CEO Dolf van den Brink attributed the disappointing results to the weather. "Usually major sporting events like the European Championship have a positive impact, but the weather was significantly worse than the long-term average and below last year's level, which has affected our business," said van den Brink.
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"Particularly in Europe, beer sales volume fell short of expectations with an increase of only 0.6 percent. Analysts had forecasted a growth of 2 percent. Northern and Western Europe were the most affected. In America, sales increased by 1.1 percent, whereas analysts had expected growth of 3.1 percent. The markets in Brazil and Mexico showed particularly positive development, while deliveries to wholesalers in the USA declined.
Heineken adjusted its forecast for the full year and now expects organic operating profit growth of 4 to 8 percent, compared to the previous forecast of low to high single-digit growth.
A significant burden arose from the write-down of the 20-percent stake in China Resources Beer. Heineken recorded an impairment of 874 million euros after the Chinese company's stock prices fell due to declining consumer demand and macroeconomic uncertainties in China. This write-down resulted in a net loss of 95 million euros in the first half of the year.
Laurence Whyatt, an analyst at Barclays, noted that the price reaction might have been influenced by positive comments from Heineken executives at a recent conference. "However, these results missed the forecasts, indicating a discrepancy between the company's statements and analysts' expectations.
Heineken acquired a stake in China Resources Beer in 2019 to strengthen its presence in the Chinese market. However, current developments show that even large brewing companies are not immune to global economic challenges.
