Article Content
MarketFlick Insights
Heineken Beats Profit Expectations After Big Restructuring But Guidance Stays Unchanged
At a glance
- Heineken exceeded H1 operating profit expectations after cutting around 3,000 jobs as part of a broader restructuring.
- Organic operating profit rose 6.7% while adjusted operating margin improved to 14.6%, up 55 basis points.
- Volume and revenue growth were positive, with core Heineken volumes and premium and Beyond Beer segments showing notable strength.
- Free cash flow improved substantially, producing a 97% cash conversion rate.
- Despite better-than-expected results, management kept guidance unchanged expecting 26% organic growth in adjusted operating profit citing macroeconomic and geopolitical uncertainty.
- New CEO Rafael Oliveira will take over in October; investors expect him to push for higher volumes and shareholder returns while completing the restructuring.
Results and restructuring
Heineken reported first-half results that beat analyst expectations on Wednesday, driven in large part by an accelerated restructuring programme that has already cut about 3,000 jobs. That figure represents roughly half of the up to 6,000 positions the company had flagged under a twoyear plan first announced by former CEO Dolf van den Brink in February.
The brewer known for brands including Heineken lager, Tiger and Sol said organic operating profit rose 6.7% in the first six months, comfortably outpacing the 3.3% growth analysts had forecast. The improvements were attributed to lower costs from staffing reductions as well as stronger performance among premium labels and the company's "Beyond Beer" portfolio.
Sales, margins and cash flow
Overall volumes increased 1.6% in the period, above consensus, while reported revenue grew 3.8% to EUR 17.56 billion. Adjusted net revenue on an organic basis rose 2.7% to EUR 14.83 billion. Adjusted operating profit reached EUR 2.17 billion, with the adjusted operating margin improving by 55 basis points to 14.6%.
Adjusted net income jumped 10.2% to EUR 1.26 billion. Adjusted earnings per share, on a currencyadjusted basis, were up 11.6% to EUR 2.29. Free operating cash flow surged to EUR 1.38 billion, generating a cash conversion rate of 97% a strong signal of the business's nearterm cash generation amid the cost programme.
Heineken also announced an interim dividend of EUR 0.76 per share and said the second tranche of its EUR 1.5 billion share buyback is proceeding on schedule. Net debt stood at 2.6 times adjusted EBITDA at the reporting date.
