Heineken’s shares dropped significantly after the Dutch brewer reported a substantial impairment in China, leading to a net loss and disappointing updated guidance. The company’s 40% stake in China Resources Beer saw a valuation decline due to concerns about China’s economic environment and consumer demand. This resulted in an impairment of €874 million ($948.9 million), pushing Heineken to a first-half net loss of €95 million, compared to a €1.16 billion profit a year earlier.
By 10:25 GMT, Heineken’s shares had fallen 7.95% to €83.62.
Despite the challenges, Heineken expects organic growth in adjusted net profit for 2024 to align more closely with inorganic growth, countering initial fears of lower growth. The company acknowledged that consumer confidence and economic sentiment in developed markets remain below historical averages, and currency and inflation issues in Africa and the Middle East will offset gains from lower commodity and energy prices.
Heineken’s revised forecast projects organic operating profit growth between 4% and 8%, a slight improvement from the previous low- to high-single-digit growth expectations. Analysts at Citi noted that this new guidance could be seen as positive since the company plans to reinvest more cost savings into marketing and sales. However, the removal of high-single-digit growth expectations has disappointed the market, which had anticipated 8.2% growth.
Consolidated beer volumes rose 2.1% organically in the first half, missing the expected 3.2% increase. The underperformance was attributed to various factors, including the timing of Easter, increased competition in Brazil’s lower-priced segment, and poor weather in Europe during June.
After a strong first quarter, Heineken faced difficulties in the second quarter, impacting overall performance. Barclays analysts commented that this report does little to reassure investors about the stability of owning Heineken shares.
The board declared an interim dividend of €0.69 per share, unchanged from the previous year.
