14 September 2018Reading time: 2 minutes

By the end of July Heineken issued a profit warning. Over the first half year of 2018, the adjusted operational profit margin plummeted with 118 points. This fall is mainly due to the integration of Brasil Kirin, which Heineken took over last year for almost 4 billion dollar. The expansion of their activities in Brazil pushed down the results of Heineken, because the profit margins are lower in the South American countries. Without Brasil Kirin the decline of the adjusted operational margin would be 76 points. Due to the declining profit margin, Heineken is considering to close down two factories in Brazil. It remains to be seen if Heineken will carry on with these plans and if the brewery will succeed to improve their margins in Brazil.

Meanwhile, Heineken focuses on China. Early August the brewery acquired an 40 percent stake in China Resources Beer Holdings for 2,7 billion euro. The Chinese company has an interest of 51,7 percent in CR Beer, which is the largest brewery in China. CR Beer dominates approximately a quarter of the Chinese Beer market. The Chinese also gained an interest of 0,9 percent in Heineken. With this deal, Heineken wants to improve their position on the Chinese market. Market analysts expects that especially the luxury beers will become more popular in China and Heineken could benefit from that development.

One of the possible risks for Heineken lies within the United States, where especially young-adults drink less and less beer. A Nielsen research shows that the consumption of beer by Americans between the age of 21 and 24 years old, has annually plummeted with almost 3 percent over the past fifteen years. Data from Euromonitor also shows that the beer consumption of all Americans has dropped between 2008 and 2017 with almost 10 percent. Heineken is one of the ten largest brewers in the US and is responsible for 2 percent of the total volume.

The stock price of the Heineken share has been very volatile this year and is now (September 11th 2018) 81,66 euro, which is the lowest price in twelve months. On July 20, the stock price peaked at 93,54 euro. The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

Vontobel products on Heineken are available at DEGIRO.

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02/03/2021 09:52:31