Sales dip but profits at Heineken up 29%

DUTCH brewing major Heineken revealed yesterday that price hikes and brewery closures in the UK helped it shrug off a 2.3 per cent drop in group beer volumes to drive interim net profits up 29 per cent.

But the group warned that imminent government moves to slash public spending was casting a cloud over the UK's short-term prospects. Heineken become the country's biggest brewer after its joint takeover with Carlsberg of the Scottish & Newcastle business in 2008.

Jean-Francois van Boxmeer, Heineken's chief executive, said the UK and European markets had "structural problems of demographics. They are not growing, the population is ageing, the (drinks] pie is becoming smaller".

On the UK government's planned austerity measures and the possible effect on consumer sentiment, Van Boxmeer commented: "It's not going to make it better any time soon."

The Heineken boss, unveiling a net profit of €621 million (508.4m) compared with €483m last time, said the group had responded to tough trading in Europe by not discounting on price and closing two former S&N breweries at Reading and Dunston, near Newcastle.

The group announced earlier this year that 600 UK jobs had gone as part of a post-takeover rationalisation, including 200 in Scotland. No major further UK redundancies were planned, Heineken's chief financial officer, Rene Hooft Graafland, said yesterday.

Heineken noted that strong earnings growth in the UK helped drive overall west European earnings up 6.3 per cent to €383m "driven by better pricing and significant cost reductions partly offset by higher investments in brands". Heineken's main brands in the UK are Heineken Export, John Smith's, Strongbow and Kronenbourg 1664.

Stefan Orlowski, MD of Heineken UK, said the performance was encouraging "particularly in the light of a still fragile UK drinks market".

Heineken's volumes in western Europe - it does not give a UK figure - fell 2.5 per cent, but plunged 15 per cent across central and eastern Europe due to tax rises.

Van Boxmeer said he did not expect any significant improvement in volumes in tough markets like the US and Europe.

However, he expected strong growth to continue in Latin America, Africa and Asia. Heineken's volumes in Latin America and Asia leapt 79 per cent and 70 per cent respectively in the first six months of 2010.

"The sweet spot for developing sales (in these countries) is population growth, economic growth and political stability," Van Boxmeer added.