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Heineken has reported stronger-than-expected first-quarter revenues and volumes, but the Dutch brewing giant warns that escalating energy costs and inflation, exacerbated by the conflict in the Middle East, could dampen future demand for its products.
The world's second-largest brewer, behind Anheuser-Busch InBev, was already bracing for a challenging year amid persistent cost-of-living pressures, evolving consumer drinking habits, and US tariffs.
The ongoing conflict in the Middle East is now driving up the cost of essential brewing fuels and glass bottles, threatening to push up prices across a range of consumer goods and potentially further curbing discretionary spending on beer.
Despite these headwinds, the company saw a 2.8 per cent rise in organic net revenue for the first quarter, surpassing analyst predictions of 2.3 per cent. Total volumes also grew by 1.2 per cent organically, defying forecasts that anticipated flat performance over this quarter.
This comes as Heineken prepares to cut 6,000 jobs and seeks a new chief executive following Dolf van den Brink's unexpected departure in January. The brewer, known for brands like Tiger and Sol, did not address the CEO search in its latest results statement.
The conflict in the Middle East has made the fuel needed to brew its products and make glass bottles more expensive and threatens to push up prices on a range of consumer goods, which could further dent drinkers' beer spending ( Reuters )
"Global trade has become more complex and volatile, with impacts on energy availability and costs in certain markets. This leads to inflationary pressures, which might affect consumer sentiment in the medium-term," van den Brink said, without mentioning the war directly.
The company reiterated its full-year outlook for between 2 per cent and 6 per cent organic operating profit growth.
It said its outlook is "based on the assumption of a temporary rather than a prolonged disruption in global trade".
In the first quarter, strong performance in Asia Pacific helped offset declines in beer sales in both Europe and the Americas, including the US and large beer markets like Brazil and Mexico.
RBC Capital Markets analyst James Edwardes Jones said Heineken's first quarter was "reassuringly uneventful" in a note.
The report is the last to be presented by van den Brink, who steps down on 31 May. Heineken said in January it had initiated a search to appoint his successor.