Heineken share price up, boosts dividend on strong profit growth

Heineken NV projected slower sales and earnings growth for this year, after strong demand for its high-margin products boosted results in 2014, prompting the company to lift its dividend.

The worlds third-largest brewer said sales and profit will continue to expand in 2015, despite difficult trading conditions in developing markets and severe price competition elsewhere. However, sales are expected to grow at a slower pace compared to 2014, when organic revenue climbed 2%.

The Amsterdam-based company said it will continue its efforts to reduce costs, while planning higher marketing and advertising spending. As a results input costs are projected to be slightly lower than the previous year, excluding the impact of currencies shifts.

Heineken, owner of the Amstel and Sol brands, also said it might not manage to deliver a margin improvement of 40 basic points year-over-year, as the figure will take around 25-basic points hit from the sale of its Mexican packaging business, which is expected to close in the first quarter.

For 2014 Heineken announced an 11% increase in net profit to €1.52 billion compared to €1.36 billion a year ago, but the figures were slightly below the projection of most analysts.

Revenue climbed to €21.19 billion from €21.17 billion, with organic growth of 3.3%.

Beer volumes increased 2%, partly due to favorable weather and higher demand during the World Cup soccer tournament in Brazil.

The company also widened its dividend payout ratio from 30% to 35% of earnings to 30% to 45% for future payments. For the past year the company proposed a dividend of €1.1 per share versus the €0.89 it paid last year.

Heinekens premium products gained 5.1% in volumes, with growth across all regions. The higher-margin beers saw double-digit increases in Brazil, China, France, the UK and Mexico, which more than offset falling volumes in Greece and Vietnam.

Operating margin for the period increased 90 basis points, up from the 40 basis points that company had projected.

“Our strong performance reflects the success of our strategy,” said Chief Executive Jean-François van Boxmeer referring to 2014. “We are confident that we will deliver further top and bottom line growth in the year ahead.”

Heineken gained 0.67% on Tuesday and closed at €64.60 in Amsterdam. On Wednesday the stock edged up 1.18% to €65.36 at 10:18 GMT, marking a one-year increase of 38.17%. The company is valued at €37.21 billion.

According to the Financial Times, the 25 analysts offering 12-month price targets for Heineken have a median target of €65.00, with a high estimate of €78.00 and a low estimate of €50.10. The median estimate represents a 0.62% increase from the last closing price.