Heineken’s 3Q11 consolidated beer volume grew by 2.2% organically and by 2.7% including scope changes to 44.9m hl, somewhat better than our 44.5m hl forecast (or +1.3% organically) and significantly better than the analyst consensus of 43.9m hl (or -0.9% organically). Regional volume trends were:
Western Europe:consolidated volumes declined by 1.7% organically and in total to 12.7m hl which compares to our and consensus forecasts of 12.5m and 12.4m hl, respectively. Poor weather affected the first part of the quarter, while (36,2 EUR, 2,07%) claimed that the second half of the quarter demonstrated a solid improvement (we assume vs. the first half performance and not y/y). Volumes were lower in most countries except Italy (low single digit growth).
Central and Eastern Europe: volumes grew by 5.8% organically and in total to 13.8m hl which compares to our and consensus forecasts of 13.4m and 13.1m hl, respectively. Further recovery of volumes in Russia after last year’s adjustment of pricing compensated for a weak performance in Greece and Poland. Volume also grew in Austria, Hungary and Romania.
Africa and the Middle East: volumes grew by 6.4% organically and by 12% in total to 5.2m hl which compares to our and consensus forecasts of 5.5m and 5.3m hl, respectively. Volume grew by high single digits in Nigeria and Rwanda while declining by high single digits in Egypt (which is an improvement vs. the trend seen in 1H11).
The Americas: volumes grew by 0.8% organically and by 0.4% in total to 12.8m hl which compares to our and consensus forecasts of 12.7m hl. Volume grew in Brazil while the pace of decline in the US slightly improved vs. 1H11. Volumes in Mexico were flat which is no major surprise given the ongoing brand portfolio reshuffling.
Asia Pacific: volumes grew by 12% organically and in total to 0.4m hl which compares to our and consensus forecasts of 0.4m hl.
Revenue grew by 3.0% organically (excluding FX and scope changes) or 0.6% in total to € 4,645m which compares to our € 4,641m forecast and the analyst consensus of € 4,516m. The price and sales mix grew by 2.5% which is an improvement from the 1H11 trend of +1.1%.
EBIT (beia)was lower in the quarter (no detailed figure provided) which is no surprise as we forecast a 3% EBIT (beia) decline in 2H11 to € 1,431m and consensus is approximately € 20m lower.
Net profit was reported approx. flat at € 525m which is no surprise neither.
reiterated guidanceof a flat FY net profit (beia) from an organic viewpoint that was given already at the time of the 1H11 release, on the back of weak volumes in summer in Europe and ramp-up costs for the Global Business Services organization.
Our View:
The much better than expected organic volume trends vs. consensus (+2.2% vs. -0.9% expected) is certainly positive news and shows that is more than Western Europe alone. EBIT (beia) is currently affected by costs for the roll out of the Global Business Services organization, which should start to yield savings as of next year onwards. We stick to our BUY rating and € 45 price target given the overall defensiveness of the beer category and Heineken’s discounted valuation vs. brewing, spirit and FMCG peers.