Heineken's H1 2019 profits affected by rising packaging costs due to higher aluminium prices

Heineken NV reported on Monday that it missed profit estimates for H1 2019 despite higher sales, attributing it to rising packaging costs due to higher aluminium prices.

The world's second-largest brewer and Europe's top-selling lager beer maker sticks to its profit growth forecast for the full year. The company experienced 0.3per cent increase in the Jan-June period which is likely to increase by the end of 2019.

The company expects to be benefitted in 2019 from higher sales volume, higher prices and a consumer shift to more expensive beers. However, input and logistics costs would rise by a mid-single-digit percentage over 2019. Heineken's input costs during January-June rose 8.5per cent, primarily for the costlier aluminium used in its beer cans.

Company’s CFO Laurence Debroux told Reuters in a telephone interview that the company's hedges on aluminium had been less favourable than 2018. The company had to pay for packaging materials with a weaker Brazilian real.

Beer sales volumes rose in all regions in H1 2019, except Europe, where it was hit by poor weather and low demand.

Operating profit grew YoY to 1.78 billion euros (US$1.98 billion) in H1 2019, missing the estimated profit of 1.92 billion euros. Sales in Vietnam rose by a double-digit percentage. Sales in Mexico and Brazil increased moderately.

"We knew the first half was going to be weaker than the second, but clearly the market hadn't realized the scale of the pressures in the first," said Trevor Stirling, beverage analyst at Bernstein Securities. "The business itself is in pretty good shape," he concluded.