Heineken cuts full-year margin forecast after lower-than-expected first-half profit

  • Heineken cut its guidance for full-year margins on Monday.
  • The brewer forecast that its operating margin would decline by 20 basis points, compared with a previous forecast of 25 basis point increase.

Heineken, the world's second largest beer maker, cut its guidance for full-year margins on Monday after reporting first-half earnings below market expectations.

The brewer of Heineken lager, Tiger, Sol and Strongbow cider forecast that its operating margin would decline by 20 basis points, compared with a previous forecast of 25 basis point increase.

The Dutch brewer, whose Heineken lager is the top seller in Europe, said that this was because of a higher-than-expected negative translational hit from currencies and a larger dilutive effect of its expanding Brazilian operations.

Heineken Chief Executive Jean-Francois van Boxmeer described the Brazilian effect as "good and bad news," speaking to CNBC's "Squawk Box Europe" on Monday.

"Brazil has a lower than our average margin across the group, but it is growing much faster than we anticipated so that is very good news," the CEO said.

He noted that Heineken's premium market in Brazil was still growing faster than the company had expected. "Synergies are flowing through in Brazil, growth higher than anticipated. It comes in still at a lower margin than our group average, but we gain, of course, confidence that in the years ahead we'll be able to catch up also in Brazil with the margins."

In terms of the hit from currencies, Van Boxmeer explained that the strengthened euro weighed on the company's input costs, as well as "the transactional and partly the translational effect due to the foreign exchange towards the euro."

"The good news is that we have strong revenue growth, and we continue to invest behind that revenue growth, because I think we have the right programs and actions in place so we're not going to change on that account," he said.

Heineken shares dropped 5 percent as European markets opened on Monday.