Heineken reveals profit hike ahead of Punch deal

Dutch brewing giant Heineken has cheered a near-10 per cent hike in annual earnings ahead of its planned takeover of pubs business Punch Taverns.

Heineken is ranked as the world's second largest brewer. Picture: Ian Georgeson

The group today reported an underlying operating profit of €3.54 billion (£3bn) for 2016, up from €3.38bn and said it sold 3 per cent more beer by volume.

But it also revealed a €1.15bn hit to revenues from the fall in the pound, as well as currency depreciation in other markets, although overall turnover was still up by 1.4 per cent to €20.8bn.

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Heineken, which owns Edinburgh’s historic Caley Brewery, said it is set for further sales and profit growth over the year ahead, but cautioned over “volatile” economic conditions and is expecting a further currency impact of up to €75 million.

In December, the beer maker sealed a deal to acquire Punch Taverns alongside private equity firm Patron Capital. It will see Heineken gain 1,895 pubs and Patron 1,329.

The pair fought off a rival bid from the pub chain’s co-founder Alan McIntosh and the deal is now expected to go through by the end of the first half, subject to regulatory approval.

However, the takeover swoop has caused controversy within the industry. Paul Waterson, chief executive of the Scottish Licensed Trade Association (SLTA), said the body had “grave concerns” about the bid involving Heineken and Patron, arguing that it would create a “monster-tie” with the Dutch group, which already owns about 1,100 British pubs.

Heineken said beer sales by volume declined “slightly” in the UK last year, but premium sales registered double-digit growth.

Global sales in the premium market rose 3.7 per cent by volume thanks also to double-digit growth across Brazil, South Africa, Mexico and Romania. It added that it continued to benefit from “global platforms” including Uefa Champions League and music-related campaigns.

Heineken said new cider drinks were well-received in the UK, with double-digit sales growth in the final six months of 2016. It saw ongoing strong sales of Strongbow, with good demand for its Strongbow Dark Fruit and Strongbow Cloudy Apple, alongside Old Mout.

Chief executive and chairman Jean-François van Boxmeer said: “We delivered strong results in 2016, with clear outperformance of our premium brand portfolio led by Heineken, and sustained momentum from our innovation agenda.

“Excluding major unforeseen macro economic and political developments as well as the impact of the proposed acquisitions in Brazil and in the UK, we expect continued margin expansion in 2017 in line with our previous guidance.”

Heineken ranks as the world’s number two brewer behind Budweiser firm Anheuser-Busch InBev, which sealed its position as the biggest player after its bumper £79bn takeover of SABMiller late last year.