Higher interest rates have also pushed up debt servicing costs, leaving underlying post-tax profit for 2023 down 4.3pc and underlying earnings per share (EPS) down 5.2pc. Increased finance costs will continue to weigh, which has contributed to analysts downgrading EPS forecasts for the current financial year by almost a fifth over the past 12 months. Estimates for 2025 and 2026 earnings have been cut by 15pc over the same period.
It’s at times like these that it becomes hard for investors to remember what there ever was to like about a company such as Heineken. However, the charms that have had investors raving about the business in the past remain largely intact.
Specifically, the company is a brand powerhouse. It sells over 350 types of beers, many of which boast strong local connections, while others have international pull, such as Tiger, Amstel and eponymous Heineken. It is also a leader in alcohol-free beer.
The company meanwhile boasts enviable international distribution. That includes 165 global breweries, sales in more than 190 countries and even an estate of over 2,300 pubs in the UK.
Recent trading aside, Heineken’s geographic footprint has historically been regarded as a major advantage – the growth from the 27pc of sales in Asian and emerging markets balancing the remainder made in the more mature Americas and European markets. In these slower-growth areas, Heineken aims to boost performance by increasing the sale of up-market brands.
This year should see some of the forces that have obscured Heineken’s long-term attractions start to abate. Volume trends began to improve in the second half of last year, although trading in Vietnam and Nigeria is still tough. Meanwhile, input costs aren’t rising as rapidly and interest rates are widely expected to fall.
As the headwinds ease, investors should begin to see the benefits of a €2.5bn cost cutting drive since 2020, which was intended to help the company towards that 17pc margin target. Increased marketing spending and capital investment aimed at driving growth and “premiumisation” could also bear fruit. So too could a raft of digital initiatives.
That leaves plenty of scope for the shares to rise from their current levels. Some of the world’s best fund managers think so, and this column agrees.
Questor says: buy
Ticker: AMS:HEIA
Share price at close: €89.34
Algy Hall is investment editor of Citywire Elite Companies
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