Heineken Malaysia increases its profit amid a soft market

(BRIEF CAPTION) Event ambassadors showing off the different flavours of Strongbow Apple Cider available at the garden in Gurney Plaza. Pix by: ZHAFARAN NASIB/The Star/ 12 May 2017

KUALA LUMPUR: Heineken Malaysia Bhd posted a 1.6% year-on-year profit growth for the second quarter ended June 30 despite an 11.5% drop in revenue owing to the soft market sentiment.

Announcing its interim results to Bursa Malaysia, the brewer said in spite of the lower revenue, the group lifted its profit before tax to RM80.93mil  as a result of effective cost management.

This effectiveness was due to the implementation of a procurement process that synergise with Heineken Global Procurement systems and increased productivity as a result of automation in route to market.

Heineken Malaysia said group revenue fell mainly due to higher sales made in the same quarter last year in anticipation of the price increase implemented on July 1, 2016. This was in addition to the soft market sentiment that continued to weigh down the group’s sales performance.

The drop, however, was buffered by revenue growth for premium brands driven by commendable performance in Strongbow Apple Ciders and the launch of Guinness Bright in May 2017.

The company, in its consolidated statement of comprehensive income for the quarter and period ended June 30, did not provide comparative figures for the preceding year’s corresponding period.

On Nov 25, 2015, it announced the change of financial year end from June 30 to Dec 31. Hence the last audited financial statements were for an 18-month reporting period ended Dec 31, 2016.

For the six-month period ended June 30, 2017, profit before tax was lower by 2.9%, weighed down by a 12.1% decline in revenue attributed to the earlier sell-in timing for Chinese New Year in 2017, as well as relatively higher sales in June 2016 due to the anticipated price increase from July 1, 2016.

Commenting on the performance, Heineken Malaysia managing director Hans Essaadi said the Q2 performance was commendable and showed resilience despite challenging market conditions.

“Our focus on growing the cider category is showing encouraging results, delivering double-digit growth in the first half. We are also proud of our latest innovation, Guinness Bright, which strengthens our winning portfolio and makes it even more exciting,” he said.

Contraband remains a key industry concern with the continued influx, notably an increase in Peninsular Malaysia, representing a significant revenue loss to both the industry and the Government. 

Heineken Malaysia said the growing demand for contraband was a result of the large price gap between duty-paid and contraband products due to Malaysia’s excise structure, which ranks second highest in the world behind Norway and alongside Singapore.

Essaadi said: “Heineken Malaysia remains committed to supporting the Government’s anti-contraband initiatives. We remain concerned about the longer-term detrimental impact contraband can have on the economy and fully support the Government in a concerted way to stamp out contraband.”

Heineken Malaysia declared an interim dividend of 40 sen per stock unit for the financial year ending Dec 31, 2017, payable on Oct 9.
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