Netherlands: Dutch brewing force, Heineken N.V., announced on February 22 its 2004 full year results, ahead of Heineken's forecast and market expectations. The company posted 8.1% organic net profit growth, an increase of EUR 65 million. Beer sales volume of the group was up 13.8% to 112.63 million hectolitres.

However, reported net profit decreased by 37.7% to EUR 537 million due to adverse currency movements, exceptional items, including the EUR 190 million write-down of the investment in Kaiser and a higher amortisation charge of goodwill. Reported net profit (BEIA), decreased by 1.9% to EUR 791 million, reflecting a negative exchange rate effect of EUR99 million, predominantly from the US dollar.

Sales of Heineken beer in the premium segment increased by 4.1% to 19.2 million hectolitres and the brand improved its market share in virtually all major markets. The Heineken brand grew to 22.8 million hectolitres.

Cost reductions and improvements in efficiency through an organic reduction in FTEs of 2.0% and the closure of 6 breweries.

In the US, Heineken sales volumes rose by 5% to 5.5 million hectolitres.

The integration of Brau Union is on track. In 2004, it has delivered gross synergy gains of EUR26 million and related non-recurring restructuring costs of EUR10 million.

Since the acquisition of BBAG, strict capital discipline and working capital management has delivered more than the anticipated EUR 500 million of additional cash and has resulted in cash conversion4 rates in excess of 100% for two successive years.

Thony Ruys, Chairman of the Executive Board commented: "In 2004, as a result of our focus on efficiency and our investment in growth, we have once again delivered growth in organic profit and volume across the Group. In markets where the Heineken brand is positioned in the premium segment, consumer-focused innovation and creative marketing has delivered increased sales volumes and market share.

In 2005, we will invest an additional EUR100 million in innovation and high-impact, aggressive marketing programmes in order to reinforce the Heineken brand equity in the USA, to further improve volumes and sales mix and to address the changing consumer dynamics in Western Europe. In addition, we will maintain our rigorous capital discipline and business-wide focus on cost-reduction, which will further reduce our cost base in Western Europe by at least another EUR 50 million by the end of 2007. To complement this drive for organic growth, we will actively pursue our strategy of selective, value-adding acquisitions in growth markets. I am confident that this integrated approach will be the basis of sustainable brand and profit growth for the future."

Worldwide, the premium segment of the beer market will continue to capture an increasing share of the market, benefiting sales volume of the Heineken brand in particular, and contributing to an improvement in sales mix and results across the business.

Heineken expects further organic growth in net profit for the year 2005. Taking into account the impact of the increase in marketing and innovation spend, the full benefits of which will be realised in the medium term, this growth will not exceed mid-single digits.

Heineken's long-term profit forecast is positive, as a result of the strength of its brand portfolio, its consistent and intensified spend on innovation and in the Heineken brand, its strong distribution structure and the focus on efficiency improvements.

“However, as we stated in February and September 2004, the continued currency impact, particularly of the US dollar, is expected to outweigh predicted organic profit growth and contributions from new acquisitions. This may result in a decrease in net profit for the full year before exceptional items and brand and goodwill amortisation.”

Heineken will apply IFRS in full in 2005 and restate its 2004 financial statements accordingly. The profit outlook for the full year 2005 has been prepared, based on the assumed IFRS impact.

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