Heineken Quarterly Volumes Drop, Outlook Unclear

Heineken, the world's third-largest brewer, reported a worse-than-expected drop in beer volume in the first quarter on Wednesday and said the impact and duration of the downturn remained unclear.

The Dutch company said in its first ever quarterly update that consolidated beer volume fell 6.3 percent, discounting acquisitions, notably last year's purchase of Scottish & Newcastle (S&N) assets.

Western Europeans drank 9.8 percent less of its brands such as Heineken and Amstel, central and east European thirsts diminished 12 percent less and those in the Americas 16 percent. Volumes grew in Africa, including key market Nigeria, and in the Asia-Pacific.

The few analysts willing to give forecasts had expected volumes to be flat to slightly lower, although price increases should have led to higher revenue.

First-quarter revenue also fell on a like-for-like basis, by 1 percent.

Including acquisitions, it grew by 24 percent to 3.05 billion euros ($3.94 billion).

World number two SABMiller, which has a larger emerging market footprint, said last week it sold less beer than expected in the first three months of 2009 with a fall in underlying beer volumes of 1 percent.

Just over half of Heineken's revenue last year came from western Europe, where brewers are competing fiercely over declining volumes.

Heineken said its operating profit decreased by a low single-digit percentage on an equivalent basis and in the high teens including first-time consolidations.

"The volumes are worse than expected. You have the poor economic climate, destocking and bad weather," said Gerard Rijk, analyst at ING in Amsterdam.

He added that the small overall decline in operating profit was not dramatic, but the "high teens" drop including acquisitions was not a positive sign.

Heineken said its new Total Cost Management savings program was starting to contribute to profit by reducing supply chain costs. S&N synergies were developing in line with expectations.

Heineken, whose chief brands are Heineken and Amstel, Europe's number one and three beers, bought Scottish & Newcastle with Carlsberg for 7.8 billion pounds ($11.31 billion) in 2008, mainly getting S&N's British assets.

Heineken issued a 1 billion euro five-year bond, placed six-year notes and secured a two-year credit facility in the first quarter and said it now had sufficient financial resources to cover debt repayments for the next 36 months.

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