HEIA Heineken

--Heineken aims to reshape company in strategic review

--The company warned of continuing uncertainty as new coronavirus wave hits Europe

--Third-quarter beer volumes beat expectations despite weakness in Asia-Pacific

By Adria Calatayud

Heineken NV said Wednesday that it will "streamline" its head office and regional offices to cut costs as it prepares for an extended period of volatility and uncertainty due to the coronavirus pandemic.

The Dutch brewer--which also owns the Sol, Birra Moretti and Tiger beer brands--said the changes are part of a strategic review that aims to reshape the company. Chief Executive Dolf van den Brink, who replaced longtime Heineken boss Jean-Francois van Boxmeer in June, said he wants Heineken to emerge stronger from the pandemic.

The world's second-largest brewer said it is exploring how to accelerate and expand its sources of growth while simplifying and right-sizing its cost base. Separately on Wednesday, the company said it will buy cider brand Strongbow from Asahi Group Holdings Ltd. in Australia, and gain perpetual licenses on beer brands Stella Artois and Beck's in Australia.

As a result of its office simplification, Heineken expects a reduction of around 20% in related personal costs. Implementation will begin in the first quarter of 2021, as the company had committed to not launching restructurings related to Covid-19 in 2020.

Despite a partial recovery over the summer, Heineken warned of continuing uncertainty due to a second wave of coronavirus infections in Europe, and said recurring lockdowns and the lack of international tourism in Asia-Pacific hurt its third-quarter performance in a key growth engine.

"The situation remains highly volatile and uncertain. We expect rolling outbreaks of Covid-19 to continue to meaningfully impact many of our markets in addition to rising recessionary pressures," Mr. Van den Brink said.

Shares at 0910 GMT were down EUR2.76, or 3.5%, at EUR77.28.

For the first nine months of 2020, Heineken made a net profit of 396 million euros ($467.9 million), down from EUR1.67 billion a year-earlier.

In the third quarter, organic consolidated beer volume fell 1.9%, against consensus expectations of a 5.9% decline. Heineken's volumes were better than analysts had expected in Western Europe, the Americas, and Africa, the Middle East and Eastern Europe, but weaker than anticipated in Asia-Pacific.

In the U.S., Heineken said beer volumes returned to organic growth in the quarter as distributors replenished inventories and sales through bars and restaurants showed some signs of recovery.

However, the company said the pandemic is having a significant impact on its markets and wider business. Continued volatility is expected for the fourth quarter, as many of its markets experience additional waves and fresh restrictions, including bar and restaurant closures, Heineken said.

Analysts currently expect Heineken to post a 7.7% decline in organic beer volumes for the full year. For the first nine months of the year, the company's organic beer volumes fell 8.1%, following a 12% drop for the first half.

Heineken didn't provide specific guidance for 2020, having withdrawn all guidance in April, but said product and channel mix is anticipated to continue to hurt its results, especially in Europe, and that input costs will be higher than last year.

Mitigation actions will continue for the remainder of 2020, as the company reduces all discretionary expenses in an attempt to offset the hit from the pandemic. However, Heineken said the benefits of these actions will be lower in the fourth quarter as second-half costs were skewed toward the third quarter.

Write to Adria Calatayud at adria.calatayud@dowjones.com

(END) Dow Jones Newswires

October 28, 2020 05:51 ET (09:51 GMT)

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