Nigeria, Vietnam economic conditions hurt Heineken sales

 

By Abimbola Tooki

Heineken's sales volumes fell by 4.7 per cent organically in 2023, with more than 60 per cent of that driven by declines in Vietnam and Nigeria, two key markets for the group where economic and political conditions hurt sales.

The company cut its 2023 forecast in July, citing turmoil in those markets. Nigeria and Vietnam are Heineken's largest markets and have in the past been key profit drivers.

Some analysts said its 2024 outlook could prompt cuts to consensus earnings forecasts.

Dutch brewer Heineken's 2024 profit could fall significantly below analyst estimates owing to geopolitical and economic volatility.

The company shares were shares down as much as 6.5 per cent earlier today

Analysts on average expect the world's second-largest brewer to achieve 9.9 per cent organic operating profit growth over the coming year, helped by decreasing costs from last year's high level.

Heineken, however, said growth could be anywhere between a low and high single-digit percentage, given the volatile global environment.

It had already warned that tough economic conditions could weigh on demand in some markets this year.

"We remain cautious about the global economic and geopolitical outlook," Dolf van den Brink, chief executive, said in the company's full-year results statement, adding that Heineken aims to drive revenue by a balance of volumes and prices.

Beer brewers raised prices significantly throughout 2023 to offset steep increases in costs, hurting volumes.

Mr. Biola Oni, one of the strongest lovers of Heineken brand in Nigeria and the incoming president of Osogbo Tennis Club, is unhappy with the economic situation of the country which is driving many Nigerians away from relaxation.

Oni urged the current administration of President Bola Ahmed Tinubu to pay more attention to policies that will ease tension among the people.

But Steve Minnaar, a fund manager at Abax Investments, which holds Heineken stock, said it would take a "brave CEO" to give bullish or precise forecasts in the current environment.

"There's nothing wrong with being a little more conservative and over-delivering," he added.

Heineken said it would look to focus on restoring volumes through measures including investment in its brands.

Costs are still expected to rise, it continued, adding that it will deliver at least 500 million euros ($535.85 million) in gross savings in 2024 - 100 million euros ahead of target.

Heineken reported a 1.7 per cent rise in 2023 organic operating profit, beating analyst expectations.

It booked a 491 million euro impairment charge related to its southern Africa division, formed after the 2021 acquisition of South African drinks group Distell and Namibian Breweries.