Heineken Sales Slow in Africa as Low Oil Prices Curb Demand

LAGOS, Capital Markets in Africa: Heineken NV, the world’s third-largest brewer, reported sales growth that missed expectations as demand waned in key regions such as Africa, Russia and the Middle East.

Second-quarter beer volumes dipped 5.9 percent on an organic basis across Africa, the Middle East and Eastern Europe, hurt by a weakening environment in Russia and Nigeria where low oil prices and falling currencies are denting growth. Chief Executive Officer Jean-Francois van Boxmeer said cuts to investment and jobs are possible across that region — which accounts for one-sixth of revenue — if productivity targets are not met.

“Russia and Nigeria are the worst affected but overall in the region, you have more problems than opportunities,” van Boxmeer said in an interview. “Things are difficult, with less tourists visiting Burundi, the Democratic Republic of the Congo and Egypt” and a consumer shift from Heineken’s premium brands to less-expensive beers, he said.

The Dutch brewer is grappling with an economic downturn in Africa as it prepares to battle a more profitable rival when Anheuser-Busch InBev NVenters the continent through its acquisition of SABMiller Plc. Heineken is investing 400 million euros ($447 million) in its Congolese operations, which van Boxmeer previously ran as general manager. The CEO said on CNBC he is “praying for higher oil prices” to reinvigorate demand in Africa, the Middle East and Eastern Europe.

Oil has slipped about 19 percent from an early June high, as a global glut and concerns about the strength of demand have weighed on crude prices.

The shares fell 3.1 percent to 81.85 euros at 12:39 p.m. in Amsterdam. AB InBev shares also declined, down 1 percent in Brussels.

Heineken’s shipments of premium-priced beer rose 2.6 percent, the slowest first-half pace in three years. Sales also missed estimates in the Americas, due to a “slight decline” in Brazil and the U.S., the company said. On Friday, AB InBev lowered its forecast for revenue from Brazil this year, now expecting it to be little changed from 2015.

Heineken’s beer volumes rose 4.1 percent in the first half, less than the 4.3 percent estimate, and revenue growth missed analysts’ expectations in all regions save for Europe. The brewer also reiterated its forecast for year-on-year profit-margin expansion.

Growth in the period was “modestly disappointing,” Eamonn Ferry, an analyst at Exane BNP Paribas, said in a note.

Source: Bloomberg Business News