Heineken Shares Sink After China Impairment Hits Earnings -- WSJ

By Michael Susin

Shares in Heineken fell 10% after the Dutch brewer reported weaker-than-expected earnings and wrote down the value of a big investment in China.

Heineken said Monday that it would book an impairment of 874 million euros, or $948.9 million, on its stake in China Resources Beer, saying its value had declined amid concerns about China's economic environment and consumer demand. That dragged Heineken to a first-half net loss of EUR95 million, down from a EUR1.16 billion profit a year earlier.

The write-down is the latest sign of how economic uncertainty in China is impacting Western companies, with luxury goods brands and automakers warning of a tough time there in recent weeks.

Heineken said its own business in China continued its strong growth trajectory in the premium segment of the market, with volumes of its namesake brand rising by a double-digit percentage.

Overall, Heineken said consolidated beer volumes -- which includes more than 300 beer brands such as Amstel, Red Stripe, Sol and Desperados -- rose 2.1% on an organic basis in the first half. That missed market expectations of a 3.2% increase.

After reporting forecast-beating growth in beer volumes during the first quarter, Heineken said the second quarter was hampered by the timing of Easter, intensified competition in the lower-priced beer in Brazil and poor June weather in Europe.

Looking ahead, Heineken's updated guidance also disappointed investors. The company said it now expects adjusted operating profit to grow organically between 4% and 8% this year, compared with previous guidance of low- to high-single-digit percentage growth. That is below current market expectations for 8.2% growth.

"Consumer confidence and economic sentiment in developed markets remain below their historical average," Heineken said, adding that the benefit of lower commodity and energy costs would be more than offset by currency and inflation concerns in Africa and Middle East.

Write to Michael Susin at michael.susin@wsj.com

(END) Dow Jones Newswires

July 29, 2024 11:53 ET (15:53 GMT)

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