Archive for April, 2010


Russia rise beer tax: hangover for Heineken!

The world famous dutch beer company Heineken has kind of a situation in Russia. Russian government increased taxes over beer and Heineken’s revenue shrink in Eastern Europe, a region generating 20% of the company’s revenue! This Russian beer tax as well as recurrent instability in Nigeria are seriously harming the company’s revenue and shares.

What Bloomberg says about it:

Heineken NV, the world’s third- biggest brewer by volume, said first-quarter volume declined as an excise tax increase hurt sales in Russia and Nigerian instability caused slower growth in Africa.

Volume fell 5.3 percent in the three months through January, excluding acquisitions and disposals, the Amsterdam- based company said today. That missed the median estimate of 10 analysts surveyed by Bloomberg that called for a 4.8 percent decline. Revenue slipped 3.5 percent to 2.94 billion euros ($3.95 billion), less than the 2.99 billion-euro estimate.

Heineken gets about 20 percent of its revenue from central and eastern Europe, where volume fell 14 percent after Russia tripled its excise tax on beer to help curb alcohol consumption. In Africa, the source of about 12 percent of group sales, a decline in Nigerian consumption led to slower growth.

“The weakness can be put down to central and eastern Europe, which was expected, and to a slowdown in Africa, which wasn’t,” Andrew Holland, an analyst at Evolution Securities, said by telephone. He has a “neutral” rating on the stock.

Heineken fell 77 cents, or 2.1 percent, to 36.49 euros at 11:48 a.m. in Amsterdam trading, reversing a 1.7 percent gain. The stock has risen 10 percent this year, more than the nine- member Bloomberg Europe Beverages Index’s 8.6 percent advance.

Nigerian Decline

Heineken’s performance was “disappointing” in comparison with SABMiller Plc, which yesterday reported an unexpected 2 percent increase in volume over the same period, Evolution’s Holland said. SABMiller, the world’s second-biggest brewer, was “particularly strong in emerging markets,” he said.

Volume in Heineken’s Africa and Middle East region rose 1.7 percent in the quarter, less than the median estimate of a 4.5 percent increase. Nigeria showed a “mid-single digit” decline due to “the lack of credit in the market,” Chief Financial Officer Rene Hooft Graafland said on a call with investors. The country also faces violence in its oil-rich Niger River Delta region and, since November, a leadership crisis.

Russian sales fell about 40 percent in the quarter, more than the market average, after Heineken increased prices to recoup all of the excise hike in the country, Hooft Graafland said. The brewer is “deliberately giving up share in that market” to focus on its profitable products, he said.

Americas Region

Volume in the Americas region unexpectedly climbed 1.1 percent as stronger sales in Canada and the Caribbean offset “softness” in the U.S., Heineken said. The median estimate of the analysts was for a decline of 4 percent. Asia-Pacific sales climbed 1.7 percent, excluding asset disposals.

Earnings before interest and taxes were “significantly higher” on cost savings and a one-time gain of 142 million euros from asset transfers in Asia, the company said. Heineken increased prices across most of its markets in the quarter, “albeit at a lower level than in 2009,” the company said.

Heineken will increase marketing as a percentage of revenue to 2008 levels this year, though it expects volumes to remain “under pressure,” Hooft Graafland said. The company expects a “modest” benefit from price increases and consumers trading up to pricier brews in 2010, he said.

Sales of the Heineken brand outperformed the company average, rising 6.7 percent on “strong performances” in Italy, Nigeria, and South Africa, the company said.

Heineken said it expects to complete the acquisition of the beer assets of Fomento Economico Mexicano SAB on May 1. After adjusting for Heineken’s accounting policies, the unit’s 2009 earnings were 437 million euros, the statement shows. That means the deal multiple was 12.1 times earnings, rather than the 11.2 times multiple Heineken stated at the time of the acquisition, analysts at Evolution Securities said in a note today.


Missile sale to Iran: will Russia resist to Israeli pressures?

Russian military deals to Iran are obviously getting more and more controversial those days among Western powers, especially United States and Israel. The two countries are consistantly asking Russia to give up a military deal to provide Iran with a Russian missile defense system which could protect its nuclear facilities from air strikes.

A cleric in the Revolutionary Guards again warned Iran would hit back with missiles fired at “the heart of Tel Aviv” if it were attacked by its arch-foe Israel.

Russia is under intense Western pressure to distance itself from Iran in a dispute over Tehran’s nuclear program, but has refused to rule out delivering the S-300 anti-aircraft system.

Iranian officials have expressed growing irritation at Russia’s failure so far to supply the S-300, which Israel and the United States do not want Tehran to have.

“Iran expects Russia not to be influenced and pressured by other countries,” Foreign Ministry spokesman Ramin Mehmanparast told a news conference.

“We hope this issue will reach a conclusion in the framework of our agreements,” he said.

Analysts say the S-300 could help Iran thwart any attempt by Israel or the United States — which have refused to rule out military action if diplomacy fails to resolve the atomic row — to bomb its nuclear facilities.

The truck-mounted S-300PMU1, known in the West as the SA-20, can shoot down cruise missiles and aircraft. It has a range of 150 km (90 miles) and travels at more than two km per second.

Washington is seeking support from Russia for tougher U.N. sanctions against Iran over its nuclear program, which the West suspects is intended to produce nuclear weapons. Tehran says it is for power generation only.

Israel has hinted it could attack Iran in an effort to prevent it from obtaining nuclear weapons. Iran has threatened to retaliate for any attack by firing missiles at Israel, which is believed to have the Middle East’s only atomic arsenal.

“If Iran’s enemies target the country with their missiles, before the dust settles, the dust of our missiles will be seen in the heart of Tel Aviv,” the semi-official Fars news agency quoted cleric Mojtaba Zolnour as saying.

Zolnour, who has made similar statements before, is a deputy of Supreme Leader Ayatollah Ali Khamenei’s representative in the elite Guards force.