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EU fine takes the fizz out of Heineken 1H earnings

EU fine takes the fizz out of Heineken 1H earnings

Heineken NV reported a fall in first-half earnings Wednesday, reflecting a euro219 million (US$299 million) fine levied against the Dutch brewer by the European Union for price fixing as part of a cartel.
Net profit was euro302 million (US$413 million), down 30 percent from euro433 million. The company, which reports earnings twice yearly, said that net profit would have been up by more than 30 percent if not for the fine, and sales rose 6.8 percent to euro6.13 billion (US$8.37 billion) from euro5.74 billion in the same period of 2006.
Heineken repeated forecasts for 20 percent growth in earnings for 2007, before exceptional items such as the fine, which it may appeal.
Heineken said its sales increase was "driven by strong volumes, an improved sales mix and higher pricing."
Chief Executive Jean-Francois van Boxmeer said in a statement that the company's performance was strong "even when taking into account the exceptional and favorable weather patterns experienced in Europe in the first half."
But he warned that worse weather and rising materials costs would be felt in the second half.
Rising energy, grain and packaging costs will have added 8 percent to Heineken's raw materials costs in 2007, the company said.
About a third of Heineken's sales increase was due to price rises passed on to consumers, and two-thirds due to increased volumes.
The company showed operating profit increases in all areas, with its most profitable Western European operations up 12 percent to euro332 million (US$454 million) on a 1 percent volume increase, due in part to cost savings.
In Central and Eastern Europe, already Heineken's largest market by volume, volume growth was an additional 12 percent and operating profit was up 34 percent to euro207 million (US$283 million).
In Africa, operating profit was up 34 percent to euro154 million (US$210 million), passing the Americas in terms of importance to Heineken's bottom line.
In the Americas, where Heineken has introduced a light beer in the U.S. market in the past year, operating profit was up 5 percent to euro134 million (US$183 million), with volumes up 4.3 percent.
In Asia, profits rose 11 percent to euro52 million (US$71 million).
Heineken's price-fixing fine was the largest among three major Dutch brewers fined for coordinating price hikes in 1996-1999, since it controls more than half the market in the Netherlands. Heineken denies the charges, saying the increases were in line with rising prices generally during that period.
A fourth player on the Dutch market, Belgium's InBev SA _ one of Heineken's biggest competitors globally _ was not fined because the EU said it acted as the whistle-blower.
Regulators raided the offices of Heineken and the other brewers and later said they had found handwritten notes taken during secret price-fixing meetings that confirmed they took place, backing up information supplied by InBev. Providing "decisive information" allowed InBev to escape a potential euro84 million (US$114 million) fine.
Royal Horeca Netherlands, the organization of Dutch hotels, restaurants and cafes, has said it plans to file suit against all the brewers, seeking "substantial" damages and demanding they lower wholesale prices.


Updated : 2021-04-14 09:16 GMT+08:00