Heineken N.V. Earnings Call Insights: Africa – Middle East and Full-Year Guidance Outlook
Heineken N.V. (NYSE:HEIA) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Africa – Middle East
Andrea Pistacchi – Citigroup: I have a couple of questions, please, mainly on Africa Middle East. Now, in Nigeria in particular, there was a good volume improvement in the second quarter. If I calculate right, you had about mid-single-digit volume growth there. You commented generally that you expect better performance in Nigeria in the second half. Is sort of 6% in your view a number we can extrapolate for 2H? Or does it better than that? On price mix, so in Africa Middle East, I saw it was up only about 4% and it’s been around 7%, 7.5% for the past couple of years and 4% is below inflation, clearly, in places like Nigeria. So I was wondering if you could comment on that. Then just one very final clarification on your guidance; you talk about flat organic profit beia growth. I assume this is on the restated (EUR1661 million) of net profit beia rather than on the old sort of 2012 base. Is that right?
Rene Hooft Graafland – CFO: Yes, to start, (with) the last that is correct, and so it is compared with the restated 2012 figures. On that Nigeria, we don’t give specific guidance on volume developments of the markets. We have said that Q2 was better than Q1 and we will see what will happen going forward. The overall mix in Africa Middle East revenue per hectoliter is a bit influenced on what is happening in the DRC, but also in Nigeria, where you see that on one hand the top end is growing pretty fast as well Heineken is doing very good, at the same time, the more low-priced brands like Goldberg in our portfolio are growing pretty fast as well and that has a bit of an impact on the overall revenue per hectoliter.
Full-Year Guidance Outlook
Henry Davies – Bank of America Merrill Lynch: Yeah, I’ve got two questions. First, on the full year guidance. Now, in the first quarter stage you said you still expected volume growth. I’m just wondering what that expectation is now. If it is materially worse, should we now expect that margin guidance for flattish to slightly up to be down? Then just on the volume picture, if you could just tell us what have been the main changes maybe by region since your expectation a few months ago of volume growth and despite the hot weather we’ve seen in July? That’s the first question. Then the second question on the TCM2 savings, now looking at the first half consolidated numbers, EBIT was down 2%, but if we exclude these savings, it was down 14%. If we just run that against your sales and volumes, that implies total cost up 1% or 6.5% on a per hectoliter basis. So I’m just wondering how your costs can be increasing 6.5%, given inputs are running up 2%, A&P is reducing as a percentage of sales. I’m just wondering what I’m missing there?
Jean-Francois van Boxmeer – Chairman and CEO: Now the volume outlook, what we didn’t plan for is a very, very, very poor spring and you cannot – even if we look out for a much better summer, you cannot make up for that very poor spring. So that’s a one-off and we cannot plan for that and I don’t think that that is a recurrent item statistically. The other thing that we say is that the outlook on consumer confidence, we live in a volatile world, but I don’t see that improving in the coming half year, substantially in the Northern Hemisphere, being it Europe and the United States. The third thing that perhaps was a little bit more came in stronger than we thought is the slowdown of a number, not all, but a number of what are considered as key developing markets like Brazil, which is noticeable, slowdown of China has an impact on Africa. Then there are things that you cannot foresee and those are to do with civil unrest and conflicts. We have had the, for instance a very good half year in Egypt, but we look out to a much lesser one in the second half, so globally that’s a little bit – our sales outlook in broad lines, I would say.
Rene Hooft Graafland – CFO: Then on the TCM, to be honest, I could not follow fully your reasoning and modeling, so I cannot see whether you are right or wrong and I advise you to relate later on with IR. What I can say that we have had the very solid savings in the first half of the year, EUR139 million. Obviously, that is needed partly to beat inflation which you will have on your cost base. So, it is not a (NASDAQ:FULL) net saving, it isn’t gross saving in that respect. I would not take them separate and remodel because these are structural savings, are not one-off, are structural savings in the business and shown in the part of doing business.
Henry Davies – Bank of America Merrill Lynch: Can I just come back on the first question. Given that the expectation is now I am guessing for volumes declines, can we then read on from that, that the expectation of flat to up margins from the first quarter stage is now margin contraction at the full-year level?
Rene Hooft Graafland – CFO: We have been clear in guiding on net profit on an organic basis in line with last year and based on that you can make your conclusions.