2020 full year results highlights:
- Net revenue (beia) organic growth -11.9%; per hectolitre -2.4%
- Consolidated beer volume -8.1% organically
- Heineken® volume resilient -0.4%
- Operating profit (beia) organic growth -35.6%, margin 12.3% (-455 bps)
- Net profit (beia) €1,154 million, -49.4% organically
- Diluted EPS (beia) €2.00 (2019: €4.38)
EverGreen strategic review update:
- Deliver superior and profitable growth in a fast-changing world
- Placing consumers and customers at the core, enhance our portfolio and
strengthen our digital route to consumer - Raise the bar on sustainability and on our people agenda
- Step up in productivity starting with €2 billion gross savings through 2023
to fund our journey - Restore operating profit margin (beia) to around 17% by 2023 and gear
for operating leverage beyond
CEO STATEMENT
"In a year of unprecedented disruption and transition, our teams rose to the occasion and quickly adapted while not losing sight of the need to continue investing for the future. The impact of the pandemic on our business was amplified by our on-trade and geographic exposure. We took diligent cost mitigation actions balanced with continued investment behind our growth platforms. We gained share in most of our key operations, a testimony to our ability to adapt and stay close to our customers and consumers in these turbulent times. The Heineken® brand was a bright star, with a continued outstanding performance in
While navigating the crisis, we are building our future. EverGreen leverages both our strengths and new opportunities to chart our next chapter of growth. We aspire to deliver superior and profitable growth in a fast changing world. Firmly putting customers and consumers at the core we aim to continually enhance and expand our portfolio and footprint. We are stepping up our focus on continuous productivity improvements and raising our environmental and social sustainability ambitions. All of this gives us confidence that we will continue to deliver long-term value for all our stakeholders."
FINANCIAL SUMMARY1
IFRS Measures | € million | Total growth | BEIA Measures | € million | Organic growth2 | |||||
Revenue | 23,770 | -16.7 | % | Revenue (beia) | 23,770 | -11.3 | % | |||
Net revenue | 19,715 | -17.7 | % | Net revenue (beia) | 19,724 | -11.9 | % | |||
Operating profit | 778 | -78.6 | % | Operating profit (beia) | 2,421 | -35.6 | % | |||
Operating profit (beia) margin (%) | 12.3 | % | ||||||||
Net (loss) | (204) | -109.4 | % | Net profit (beia) | 1,154 | -49.4 | % | |||
Diluted EPS (in €) | (0.36) | -109.5 | % | Diluted EPS (beia) (in €) | 2.00 | -54.3 | % | |||
Free operating cash flow | 1,513 | |||||||||
Net debt / EBITDA (beia)3 | 3.4x |
1 Consolidated figures are used throughout this report, unless otherwise stated; please refer to the Glossary for an explanation of non-GAAP measures and other terms used throughout this report.
2 Organic growth shown, except for Diluted EPS (beia) which is total growth.
3 Includes acquisitions and excludes disposals on a 12 month pro-forma basis.
NAVIGATING THE CRISIS WHILE BUILDING THE FUTURE
From the onset of the pandemic, people's health and safety have been our highest priority. To support our employees in doing their jobs safely, we established robust COVID-19 preventive measures including working from home where possible, social distancing, strict personal hygiene and disinfection protocols, and providing adequate personal protective equipment.
We also supported our customers, suppliers and the communities most impacted by the pandemic. We assisted customers with advice, re-opening tools, stock returns and helped them set up online delivery. We supported them financially, for example, by waiving close to €50 million in rental payments. We raised over €10 million to support 50,000 outlets across 21 countries through our Back the Bars initiative. We continued to pay all suppliers on time and reduced payment terms to various small suppliers.
We provided
Our people adapted quickly and took decisive actions to guarantee business continuity. We entered the crisis with a strong balance sheet and took immediate steps to strengthen our liquidity. We took action to swiftly reduce discretionary expenses and mitigate the impact on our business performance while protecting the future. Our commercial teams reallocated resources across channels and brands, increasing their focus on off-trade customers. We accelerated the deployment of our e-commerce platforms, capitalising on digitalisation trends as consumers and customers shopped online. Our supply chain teams demonstrated great agility to adapt to a radically different and volatile environment with excellent efficiency and minimum disruptions. As a result, we outperformed the market in most of our key markets.
In parallel, our colleagues in support functions adapted quickly to working from home, produced timely rolling-forecasts to inform decisions and managed eight, remotely supported, deployments of our standardised ERP platforms in
Finally, we continued to shape our business for growth, with our entry into
TOP-LINE PERFORMANCE
COVID-19 continues to have a material impact on our top-line performance, affecting all geographies and markets as governments across the world took measures to mitigate the contagion including restricted population movement, social distancing, outlet closures and temporary lockdowns of production facilities.
Net revenue (beia) declined 11.9% organically, with a 9.8% decrease in total consolidated volume and a 2.4% decrease in net revenue (beia) per hectolitre due to country mix effects and non-volume related revenue decline. The underlying price mix on a constant geographic basis was broadly flat for the full year. Currency translation negatively impacted net revenue (beia) by €1,259 million or 5.3%, mainly driven by the Brazilian Real, the Mexican Peso, the Nigerian Naira, the Russian Rouble and the South African Rand.
The second half of the year benefited from a good summer with some easing of operating constraints including in the European on-trade. Net revenue (beia) decreased 7.8%. Total consolidated volume declined 6.4% and net revenue (beia) per hectolitre was down 1.5% (2H19: 3.6% up). Underlying price mix was up 1.0% (2H19: 3.2%) driven by
Consolidated beer volume decreased 8.1% organically for the full year. Our premium beer volume outperformed the broader portfolio in the majority of our markets with a mid-single digit decline overall. The fourth quarter reflects the impact of renewed restrictions in all regions, especially in
Consolidated beer volume (in mhl) | 4Q20 | 4Q19 | Organic growth | FY20 | FY19 | Organic growth | ||||||
56.2 | 61.1 | -7.9 | % | 221.6 | 241.4 | -8.1 | % | |||||
11.2 | 11.5 | -2.9 | % | 39.6 | 43.7 | -9.2 | % | |||||
22.5 | 23.3 | -3.5 | % | 79.1 | 85.6 | -7.5 | % | |||||
7.6 | 8.4 | -9.6 | % | 28.1 | 31.1 | -7.9 | % | |||||
14.8 | 17.8 | -16.3 | % | 74.8 | 81.0 | -8.2 | % |
Heineken® volume declined marginally by 0.4%, significantly outperforming the total market and our overall beer portfolio. The brand grew double-digits in 25 markets including
Heineken® 0.0 grew strong double-digits with growth in all regions and an outstanding performance in
Heineken® volume (in mhl) | 4Q20 | Organic growth | FY20 | Organic growth | ||||
Total | 10.7 | -4.3 | % | 41.8 | -0.4 | % | ||
1.7 | -20.2 | % | 5.6 | -23.0 | % | |||
4.4 | 15.6 | % | 15.9 | 18.7 | % | |||
1.9 | -0.1 | % | 6.4 | 0.6 | % | |||
2.7 | -19.1 | % | 13.9 | -7.1 | % |
The international brand portfolio had a mixed performance across brands and markets. Desperados grew double-digits driven by
in the
Cider volume declined in the high-teens to 4.6 million hectolitres (2019: 5.6 million), due to pub closures in the
Low & No-Alcohol (LONO) volume decreased slightly, delivering 14.0 million hectolitres (2019: 14.1 million) and outperforming the overall portfolio in most of our markets. The no-alcohol portfolio grew mid-single-digit, driven by Heineken® 0.0 globally and Maltina in
We entered the
Our e-commerce platforms showed strong growth as digitalisation trends accelerated, consumers changed shopping patterns and customers adapted to new realities.
- Beerwulf, our direct-to-consumer platform in
Europe , nearly doubled its revenues. All markets grew strongly, most notably theUK where revenues tripled. Online sales of our home-draught systems the Sub and Blade grew in the mid-double-digits. - All together our direct-to-consumer platforms Beerwulf, Six2Go and Drinkies tripled the number of orders from consumers in the year.
- We continued to deploy our business-to-business digital platforms at speed. We are operational in 25 markets covering more than €1 billion of our net revenue as we connect more than 100,000 customers in traditional channels.
- Our platforms also include digital connections to cashier systems and on-trade equipment, including fridges and draught beer columns. By the end of 2020, we connected to more than 130,000 customers globally.
SUSTAINABILITY AND RESPONSIBILITY
2020 was an unprecedented year in which we continued to advance against all our sustainable development ambitions, with people's health and safety at the heart of our response to the pandemic. 2020 also marked an inflexion point as we concluded our decade-long Brewing a Better World commitments and paved the way for our next phase of sustainability and responsibility ambitions.
Over the last decade we made significant progress on all six of our focus areas, designed to support the UN Sustainable Development Goals, including to promote health and safety in our operations, protect our water resources, reduce CO2 emissions, source sustainably, advocate responsible consumption, and grow with the communities where we operate.
For years, we have been a staunch advocate for making moderate consumption cool by targeting an investment of 10% of Heineken® media spend to support responsible consumption campaigns in every market where we sell and advertise Heineken®. One of our key platforms is the Heineken® Formula 1 partnership to promote “When You Drive, Never Drink”. In 2020, we complemented this campaign with Heineken® 0.0, offering consumers an alternative no-alcohol option if they do need to drive. Given the exceptional circumstances in 2020, we redirected part of our 10% Heineken® media investments from ‘responsible consumption’ to ‘socialise responsibly’ campaigns, reminding consumers to embrace social distancing and other safety measures.
Our carbon emissions in production reduced a further 3.0% in 2020 to 5.1 kilograms of CO2 per hectolitre produced bringing the total reduction to 51% since 2008. After meeting our targetted carbon emission reduction in production early, we launched our ‘Drop the C’ programme in 2018 to reduce CO2 emissions with a target to power our production facilities with 70% renewable thermal and electrical energy by 2030. In 2020, we reached 22% renewable energy in our production facilities, through wind and solar power, and sustainable biomass projects. Heineken® is now brewed with 100% green energy in
We reduced water usage by a third since 2008 to 3.4 hectolitres of water per hectolitre produced and 3.1 hectolitres in water-stressed areas, two years ahead of plan. In
We significantly increased our raw materials from sustainable sources to 58% (2019: 37%), exceeding our 2020 target. Although we slightly increased our local sourcing percentage of agricultural supplies in
On safety, we further reduced accident frequency by 31% versus last year to 0.58 per 100 FTE, surpassing our 2020 target.
In addition to our Brewing a Better World programme, we use the power of our diversity as the most international brewer to create a more inclusive work environment. At the end of 2020, there were 61 nationalities (2016: 53) and 23% female representation among our senior managers (2016: 17%). We continue to leverage our brands' strength as a force for good and build strong marketing campaigns to raise awareness on crucial societal issues, such as the Heineken® #CheersToAll campaign addressing gender stereotypes.
In 2021 we will continue to Raise the Bar on responsible consumption, environmental and social sustainability and will announce a new 2030 ambition for Brewing a Better World.
More details on our Sustainability and Responsibility programmes and progress will be available on our website and in our 2020 Annual Report.
OPERATING PROFIT PERFORMANCE
Operating profit was materially impacted by the negative consequences of COVID-19, partially offset by significant mitigation actions.
Operating profit (beia) declined 35.6% organically, with all regions in decline. Operating profit declined 78.6%. More than 90% of the organic operating profit (beia) decline was driven by
The operating profit decline in
In
In
In
Input costs per hectolitre increased by around 10% essentially driven by the negative impact of channel and product mix and to a lesser extent by transactional currency effects. Commodity prices had a slight positive impact.
Other incremental expenses included higher depreciation from previous year investments, provisions for credit losses, safety & protection equipment, donations and other forms of support to our customers and communities.
We implemented cost mitigating actions throughout the year, reducing all discretionary expenses, pausing projects, and cancelling senior managers' bonuses. These actions resulted in a net organic reduction of circa €800 million of other expenses (beia). This excludes the effects on input costs, goods for resale, transport and depreciation. Most of these cost mitigation actions are by nature non-repeating benefits.
For more details, please refer to the Financial Review.
EXCEPTIONAL ITEMS AND IMPAIRMENTS
The impact of exceptional items and amortisation of acquisition-related intangibles (eia) was €1,643 million (2019: €387 million) on operating profit and €1,358 million (2019: €351 million) on net profit.
This included impairments (net of reversal) of €963 million in tangible and intangible assets in operating profit. The impact of the crisis in developing economies and the on-trade restrictions in some developed economies triggered the need for impairment reviews. These resulted in impairments in
Exceptional items also included restructuring costs of €331 million, essentially associated with the organisational restructuring being implemented across our markets during 2021.
NET PROFIT AND LOSS
Net profit (beia) decreased 49.4% organically to €1,154 million (2019: €2,517 million). The decrease was higher than the decline in operating profit (beia) due to higher net finance expenses and the lower relative decline in minority interest. Currency translation negatively impacted net profit (beia) by €67 million or 2.7%, mainly driven by the Brazilian Real and the Mexican Peso. Net loss after exceptional items and amortisation of acquisition-related intangibles was €204 million (2019: €2,166 million profit).
TOTAL DIVIDEND FOR 2020
The
2021 OUTLOOK STATEMENTS
Overall the COVID-19 pandemic and governments' measures continue to have a material impact on our markets and business. 2021 started with many restrictions across our markets, including on-trade closures and restrictions to travel. In
According to the
Input costs per hectolitre are expected to be volatile due to channel and product mix effects. Based on our hedged positions for 2021, we expect a significantly higher negative transactional currency impact on input costs.
The EverGreen programme will be in full deployment.
Overall we expect revenue, operating profit and operating profit margin to stay below the level of 2019.
We also anticipate:
- An average effective interest rate (beia) broadly in line with 2020 (2020: 3.0%)
- Capital expenditure related to property, plant and equipment and intangible assets of around €1.8 billion (2020: €1.6 billion).
- The effective tax rate (beia) to stay above 2019 level due to the effect of fixed cost components in the tax line.
TRANSLATIONAL CURRENCY CALCULATED IMPACT
The translational currency impact for 2020 was negative, amounting to €1,259 million on net revenue (beia), €129 million at operating profit (beia) and €67 million at net profit (beia).
Applying spot rates as of
EVERGREEN
In the second half of 2020, we embarked on a strategic review, listening to and engaging with a wide range of internal and external stakeholders. We named our journey EverGreen, drawing inspiration from nature's resilience and constant adaptation and renewal.
With EverGreen, we aim to emerge stronger from the COVID-19 crisis and build on our unique strengths to deliver superior and profitable growth in a fast-changing world. We pursue a growth algorithm that translates superior growth and continuous productivity improvements into purposeful investments and operating leverage while raising the bar on environmental sustainability, responsible consumption and our people strategy.
We provide an update of our progress below. The programme is on-going and we will provide further updates in the future.
Our unique strengths and opportunities
HEINEKEN's many strengths form a solid foundation to build upon, including:
- A strong track-record of superior top-line growth
- The iconic Heineken® brand
- A footprint skewed towards growth
- A winning premium brand portfolio in a world where premium is poised to outperform
- A global leadership in non-alcoholic beer, a segment with much potential for growth
- A distinctive entrepreneurial model centred on our local operations
- Our HEINEKEN values and culture centred on quality and people, and
- Our long-term focus rooted in our 156 year history.
HEINEKEN is a superior growth company, with significant value creation potential going forward:
- Enhance our portfolio and strengthen our digital route to consumer, with consumers and customers at the core
- Complement growth with increased productivity focus
- Accelerate IT simplification and capture full e-commerce potential
- Raise our Brewing a Better World ambition towards 2030
- Drive speed, agility and external orientation in our organisation
Our way forward
As our markets recover, we aim to deliver superior top-line growth with a sharpened consumer- and customer-focused strategy across five dimensions:
- Expand and develop our footprint to maintain our growth advantage
- Focus and expand our portfolio to better serve consumers
- Shape and strengthen our route to consumer digitally
- Scale execution excellence through commercial capability building
- Drive intentional resource allocation towards growth.
We will expand and develop our footprint by strengthening our #1 and #2 positions and continuously expanding into new growth markets via greenfields and partnerships. We have also started to take action to resolve a number of value dilutive operations in our current footprint.
Regarding our brand portfolio, we will amplify our strong premium position by winning value share with Heineken®, everywhere; scale and replicate the success of our international brands; and make fewer, bigger bets in local premium brands. We will also stretch beer and move beyond beer, innovating to serve consumers better. We will make 0.0% beer available everywhere, always, with Heineken® 0.0 and no-alcohol options across our entire portfolio. We will expand beer to meet new consumer needs and occasions and move beyond beer to serve consumers better. For example, on
We aim to become the best connected brewer, digitally enabling and strengthening our route to consumer. We will connect all our customers through our business-to-business platforms, reaching €10 billion net revenue by 2025 in traditional channels. Our entire sales force will be digitally empowered by 2023. We will continue to invest selectively in direct-to-consumer platforms and touch all consumers with Individual Data Driven Marketing.
Continuous productivity improvements will fuel the investments required to support our growth strategy. We are building a cost management capability to continuously develop initiatives and cultivate a cost-conscious culture. At the end of 2020, we launched an initial productivity programme of €2 billion gross savings by 2023 which we estimate will have a cost to achieve of approximately €500 million OPEX and €400 million CAPEX. The programme will be key to restore our marketing and spend levels, front-load investments in digital and technology and mitigate the incremental costs from accumulated inflation and significant transactional currency costs. This cost management capability will gear us for operating leverage beyond 2023.
The initiatives to deliver the €2 billion gross savings are concentrated in three key productivity areas:
- An organisational redesign in 2021 to be more efficient and effective
- An efficiency programme to reduce complexity and number of SKUs, reduce conversion costs in production and optimize logistics
- A commercial productivity programme tackling our least effective spend, fully reinvesting the productivity gains
Regarding the organisational redesign, on
Our productivity programme enables accelerated investments with sharpened resource and capital allocation, in particular:
- We will drive efficiency of our consumer and customer-focused investments, restoring our marketing and sales spend as a percentage of net revenue (beia) to the levels of 2019 by latest 2023, fully reinvesting all commercial productivity gains
- We will front-load investments to accelerate our digital & technology transformation, including our digital route to consumer, digital core & backbone, advanced analytics and global data hubs
- We will sharpen our resource allocation within and across our local operations
- Will maintain our disciplined use of capital, maintain a strong balance sheet and remain committed to bringing back our Net Debt to EBITDA (beia) ratio below 2.5x.
Finally, we will Raise the Bar on responsible consumption, environmental and social sustainability and will introduce a renewed ambition for this decade in the coming months. We will also step-up on our people strategy, to be more externally oriented, boost capability building and enhance disciplined entrepreneurship in our operating model.
Long term value creation
As we charted this next growth chapter we have made some general assumptions on the recovery.
We expect market conditions to gradually improve in the second part of 2021 and to continue improving into 2022, with significant differences across markets and channels. In particular, we see a slow recovery of the on-trade channel in
With EverGreen we aim to create long-term value for all our stakeholders by delivering superior top-line growth, restoring margins and gearing for operating leverage. As we recover from the crisis, we expect to achieve an operating profit margin (beia) of around 17% by 2023 and to continue to drive operating leverage thereafter.
For more details, please join us for the presentation of EverGreen today during our video webcast. Details on the next page.
SUPERVISORY BOARD COMPOSITION
HEINEKEN will make a non-binding nomination for Mr
In
ENQUIRIES
Media | Investors |
Director of Global Communication | Investor Relations Director |
Investor Relations Manager / Senior Analyst | |
E-mail: pressoffice@heineken.com | E-mail: investors@heineken.com |
Tel: +31-20-5239355 | Tel: +31-20-5239590 |
INVESTOR CALENDAR HEINEKEN N.V.
Combined financial and sustainability annual report publication | |
Trading Update for Q1 2021 | |
Annual General Meeting of Shareholders | |
Half Year 2021 Results | |
Quotation ex-interim dividend 2021 | |
Interim dividend payable | |
Trading Update for Q3 2021 |
CONFERENCE CALL DETAILS
HEINEKEN will host an analyst and investor video webcast about its 2020 FY results combined with an update on the on-going strategic review at
https://www.theheinekencompany.com/investors/results-reports-webcasts-and-presentations. An audio replay service will also be made available after the webcast at the above web address. Analysts and investors can dial-in using the following telephone numbers:
All other locations: +44 20 3936 2999 |
Participation password for all countries: 293180 |
Editorial information:
HEINEKEN is the world's most international brewer. It is the leading developer and marketer of premium and non-alcoholic beer and cider brands. Led by the Heineken® brand, the Group has a portfolio of more than 300 international, regional, local and specialty beers and ciders. We are committed to innovation, long-term brand investment, disciplined sales execution and focused cost management. Through "Brewing a Better World", sustainability is embedded in the business. HEINEKEN has a well-balanced geographic footprint with leadership positions in both developed and developing markets.
We employ over 84,000 employees and operate breweries, malteries, cider plants and other production facilities in more than 70 countries.
(OTCQX: HEINY) and Heineken Holding N.V. (OTCQX: HKHHY). Most recent information is available on HEINEKEN's website: www.theHEINEKENcompany.com and follow us on Twitter via @HEINEKENCorp.
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Disclaimer:
This press release contains forward-looking statements with regard to the financial position and results of HEINEKEN’s activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond HEINEKEN’s ability to control or estimate precisely, such as future market and economic conditions, developments in the ongoing COVID-19 pandemic and related government measures, the behaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquired businesses and achieve anticipated synergies, costs of raw materials, interest-rate and exchange-rate fluctuations, changes in tax rates, changes in law, change in pension costs, the actions of government regulators and weather conditions. These and other risk factors are detailed in HEINEKEN’s publicly filed annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which speak only of the date of this press release. HEINEKEN does not undertake any obligation to update these forward-looking statements contained in this press release. Market share estimates contained in this press release are based on outside sources, such as specialised research institutes, in combination with management estimates.
1 In 2020 restructuring costs amounted to €331 million, mainly related to this programme. For more details see page 20.
Attachment
Heineken NV 2020 Full Year results press release (10_02_2021)
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