Heineken, Carlsberg to cut costs
Brewers Heineken NV and Carlsberg A/S, which carved up Scottish & Newcastle last year, committed to slashing debt, costs and spending yesterday in anticipation of a recession-hit 2009. Heineken, the world's third-largest brewer, said it was "cautious"...
Brewers Heineken NV and Carlsberg A/S, which carved up Scottish & Newcastle last year, committed to slashing debt, costs and spending yesterday in anticipation of a recession-hit 2009.
Heineken, the world's third-largest brewer, said it was "cautious" about the development of beer consumption this year after a number of markets slowed at the end of 2008. Both Heineken and world number four Carlsberg noted beer consumption was typically quite resilient to recessions, although the Dutch brewer said downturns could spur a switch from bars to drinking at home and to cheaper brands.
"Beer is one of the less affected consumer categories in economic recessions. It's clearly not immune to weaker economies but overall it's holding up well," Carlsberg chief executive Jorgen Rasmussen told a conference call.
The two bought Scottish & Newcastle for £7.8 billion last year, Heineken chiefly getting the British assets while Carlsberg expanded in Russia and France. Analysts said yesterday's figures suggested Carlsberg had got the better part of the deal.
Heineken, which brews beer under its own name and the Amstel brand, said its focus now would be on cash generation of over 100 per cent of net profit for 2009-2011 to pull net debt down to 2.5 times EBITDA (earnings before interest, tax, depreciation and amortisation) from 3.3 times.
It also unveiled a new three-year cost-cutting programme, Total Cost Management, but gave no targets. Its Fit2Fight scheme concluded in 2008 with €486 million in savings.
Mr Rasmussen said Carlsberg - would focus on increasing cash flow and cost control, "significantly" reduced capital expenditure and accelerated debt repayment this year. The group last year announced a number of cost cuts in its French and British businesses.
Capital expenditure would drop to 3.75 billion crowns in 2009 from 5.3 billion in 2008 and it would reduce net debt to about three times EBITDA by the end of the year from about 3.8 times at the end of last year.
One positive note would be lower costs for oil, aluminium for cans and essential ingredients such as barley in 2009. Brewers faced double-digit percentage rises in input costs last year.
"We have contracted part of input costs, but clearly there is a very strong downward trend," said Heineken CEO Jan-François van Boxmeer, adding that the 2009 rise would be "substantially lower" than the eight per cent it had previously forecast.
Heineken reported an 11 per cent rise in 2008 operating profit before exceptionals to €1.93 billion, below forecasts of €1.98 billion.
Carlsberg, which brews Baltika beer as well as its own brand, posted a 52 per cent increase in operating profit to $1.45 billion, slightly above expectations, and forecast a slightly higher figure for this year.
Heineken, the world's third-largest brewer, said it was "cautious" about the development of beer consumption this year after a number of markets slowed at the end of 2008. Both Heineken and world number four Carlsberg noted beer consumption was typically quite resilient to recessions, although the Dutch brewer said downturns could spur a switch from bars to drinking at home and to cheaper brands.
"Beer is one of the less affected consumer categories in economic recessions. It's clearly not immune to weaker economies but overall it's holding up well," Carlsberg chief executive Jorgen Rasmussen told a conference call.
The two bought Scottish & Newcastle for £7.8 billion last year, Heineken chiefly getting the British assets while Carlsberg expanded in Russia and France. Analysts said yesterday's figures suggested Carlsberg had got the better part of the deal.
Heineken, which brews beer under its own name and the Amstel brand, said its focus now would be on cash generation of over 100 per cent of net profit for 2009-2011 to pull net debt down to 2.5 times EBITDA (earnings before interest, tax, depreciation and amortisation) from 3.3 times.
It also unveiled a new three-year cost-cutting programme, Total Cost Management, but gave no targets. Its Fit2Fight scheme concluded in 2008 with €486 million in savings.
Mr Rasmussen said Carlsberg - would focus on increasing cash flow and cost control, "significantly" reduced capital expenditure and accelerated debt repayment this year. The group last year announced a number of cost cuts in its French and British businesses.
Capital expenditure would drop to 3.75 billion crowns in 2009 from 5.3 billion in 2008 and it would reduce net debt to about three times EBITDA by the end of the year from about 3.8 times at the end of last year.
One positive note would be lower costs for oil, aluminium for cans and essential ingredients such as barley in 2009. Brewers faced double-digit percentage rises in input costs last year.
"We have contracted part of input costs, but clearly there is a very strong downward trend," said Heineken CEO Jan-François van Boxmeer, adding that the 2009 rise would be "substantially lower" than the eight per cent it had previously forecast.
Heineken reported an 11 per cent rise in 2008 operating profit before exceptionals to €1.93 billion, below forecasts of €1.98 billion.
Carlsberg, which brews Baltika beer as well as its own brand, posted a 52 per cent increase in operating profit to $1.45 billion, slightly above expectations, and forecast a slightly higher figure for this year.