Heineken Holding

Hello and welcome to the Heineken NV Half Year 2022 results. My name is Harry and I'll be coordinating your call today. If you'd like to ask a question during the Q&A, you may do so by pressing star followed by one on your telephone keypad. And to cancel this request, you can press star followed by two. Today, we respectfully ask that you limit yourself to one initial and one follow-up question. It is now my pleasure to hand you over to the Heineken management team to begin. Please go ahead.

Good afternoon, everyone. Thank you for joining us for today's live webcast of our 2022 half-year results. Your hosts will be Dolph Vandenbrink, our CEO, and Harold Vandenbroek, our CFO. Following the presentation, we will be happy to take your questions. The presentation includes forward-looking statements and expectations based on management's current views and involves known and unknown risks and uncertainties, and it is possible that the actual results may differ materially. I will now turn the call over to Dolf.

Okay. Thank you, Federico, and welcome, everyone. We are pleased to be here today to share our half-year 22 update and give you some more color to the results you have seen early this morning. Overall, we are really encouraged by the results for the first half. We benefited from the recovery in APAC, the on-trade in Europe, as consumers returned to the bars, with demand resilient until now, despite mounting inflationary pressures on consumers' disposable income. We grew ahead of industry in more than half of our markets, and the Heineken brand again showed strong momentum, boosted by stepped-up brand support. Our actions on pricing, revenue management, and productivity offset significant inflationary pressures in our cost base. As a result, operating profits, as well as almost every relevant metric, is now firmly ahead of 2019. We continue to face an uncertain outlook for consumers and businesses alike. Remaining vigilant, we are fully committed to drive our evergreen transformation for sustained long-term value creation. Given the current economic reality, we reiterate our 22 goals, have updated our outlook for 23, and reconfirm our medium-term aspiration to deliver superior balanced growth with operating leverage over time. So let's see some highlights. Net revenue grew 24.3% organically versus last year, and clearly ahead of 2019, benefiting from balanced volume and value growth, Revenue per hectolitre grew organically by 15.6%, with pricing across all markets, offering input cost inflation on a euro-for-euro basis and a positive channel mix and premiumisation. Beer volume grew 7.6% organically and ahead of 2019 by 4.2%. The Heineken brand grew 13.8%, with more than 50 markets growing double digits. Our operating profits grew 24.6% ahead of 2019 by 22%, and the margin was 16% down 35 basis points versus last year due to consolidation effects. As excluding these, the margin would have been stable. Net profit and EPS grew even faster due to profit as well as lower interest and net financing expenses and the normalization of the effective tax rates. In the next slide, I'd like to share some more color on our progress to deliver superior balanced top line growth across the five priorities of our growth strategy. At first, you are now somewhat familiar with these. Three relate to the continuous renewal of our portfolio, one about shaping our route to consumer digitally, and one about strengthening our footprint. So starting with premiumization, a key driver of our superior growth. For now, I will focus on the wider portfolio and I will return to the Heineken brand on the next slide. Premium beer is expected to grow two times faster than overall beer and faster than total alcohol. More than 40% of our beer revenue is coming from premium. So we're best positioned to capture this opportunity. We're seeing continued momentum in the success of our premium international brands like Tiger Crystal, Amstel Ultra and Bira Moretti. Amstel Ultra continued its expansion in the Americas to reach 12 markets. Bira Moretti grew volume in the mid-20s. And in the year of the Tiger in Asia, we're uncaging the growth of our brand in Vietnam and beyond. Europe is focusing on accelerating premium through its so-called Y-accelerator brands like Ignusa and Aguila were doing extremely well. Our low and no alcohol portfolio grew volume by a low single digit with double digit growth in more than 20 markets, partly offset by declines in Poland, Russia and Egypt. The non-alcoholic portfolio grew at high single digits, led by Heineken 00. We continue to lead the development of this particular segment globally. In the Americas, Heineken 00 is now the number one non-alcoholic beer in Brazil, Mexico, and the US. On our third priority, we see plenty of opportunities to expand our product portfolio in the beyond beer space. Overall, our portfolio of flavored alcoholic beverages, including ciders and hard seltzers grew volume by a high single digit and is ahead of 2019 in the low teens. Cider was back to growth in the UK and Ireland and saw double digit growth in South Africa, Vietnam, Spain, and Portugal. For consumers who desire a more balanced lifestyle, we launched Strongbow Ultra Dark Fruit in the UK, a low calorie cider that does not compromise great taste. We remain the global market leader in cider, and with the upcoming acquisition of Distel, we will further reinforce this position. Desperados continues its momentum, particularly in its core European markets, and more than doubling its volume in Nigeria. Consumers looking for an alternative beer at a similar alcohol level, we launched Desperados alcoholic sparkling water with tequila in the Netherlands in May. We are learning from our innovations across markets and continue to introduce new propositions. For example, we launched Dos Equis Classic Lime Margarita in the U.S. For consumers craving new flavors and experiences, we launched Sol Mangoyada, that's a word twister, a combination of Sol Mango and Chamoy, further strengthening our leadership position in FABs in Mexico. moving on to our fourth priority we continue to shape our route to consumer digitally we're very happy with the accelerated expansion of both our eb2b and e direct to consumer platforms we captured 2.8 billion in digital sales value in the first half of this year close to three times the same period last year and to the entire value captured in the full year of 2021 with close to 430,000 active customers in fragmented traditional channels. The remarkable growth in digital sales volume is balanced across both our direct and indirect distribution markets, notably Mexico, Brazil, and Europe, as well as Nigeria and Vietnam on the indirect side. Vietnam observed the fastest growth with more than six times last year, offering now close to 55% of the fragmented trade. In Mexico, our most advanced market, we captured now close to 90% of the net revenue from fragmented traditional channels digitally. The net revenue of BeerWolf, our digital direct-to-consumer platform in Europe, was more than 50% ahead of pre-pandemic levels, despite the shift in consumption from in-home to the on-trade as it reopened Our E-D2C platform in Mexico, Gloop, is growing fast. The platform was launched in Monterey last year, and we're expanding into large cities in the country. And the last priority, our footprint, we're making good progress on completion of the transaction in South Africa in the second half of the year, as well as working hard to reach an agreement on the transfer of ownership on our Russia business. now on to the remarkable and consistent high performance of the Heineken brand up another 13.8 percent in the first half leading our growth in premium the momentum again was very broad based with more than 50 markets in the double digit growth Heineken silver is now present in 22 markets following an unprecedented launch in 18 European markets simultaneously Volumes of Heineken Silver have nearly doubled, driven also by strong growth in Vietnam and China. As the next step, we introduced Heineken Silver in Mexico this month with the most ambitious launch plan for the market, the Mexican market to date. Our new campaigns are driving meaningful differentiation, tackling topics like responsible consumption, gender equality, and work-life balance. Heineken's creativity was recognized as this year's Cannes Lions Festival, being the most awarded alcohol brand with 21 Lions. and driven by its strong growth momentum, innovations, and creativity, the Kantar Brand Z 2022 Global Survey recognized Heineken as the fastest growing in brand value amongst all top alcohol brands. And on this topic, I will go shortly off script, and I want to congratulate all of you who are dialing in from the UK with the epic win of the UK female football team last night. And yeah, I think it's the first time ever that so many people globally tuned in towards an all-female final, and we were very proud to be one of the enablers as a proud sponsor of the female Euro Cup. As you may have noticed, about a year, a year and a half ago, we made a deliberate choice to also start to sponsor all the female versions of all our major sponsorship platforms. So we're sponsoring the W series of Formula One, the female Formula One, as well as the female Champions League. And as you have noticed last night and the last week, the female Euro Cup. And we believe this all helps in making our brand as relevant as possible with all our consumers. Now on to the performance of the regions and starting with the Africa Middle East region. Net revenue grew organically by 24.4% and operating profits by over 44% with good cost discipline contributing to the operating leverage. Beer volumes grew 3.5% organically and are low single digits ahead of 2019. Price mix was up 19.2% on a constant geographic basis, mainly driven by strong pricing in Nigeria, Ethiopia, and the DRC. The premium portfolio grew a low single digit with a remarkable performance in South Africa and Nigeria. In Nigeria, net revenue grew in the low 30s, driven by assertive pricing and the strong performance of our premium portfolio, led by Heineken, Tiger and Desperados. Total volume declined by a mid single digit, driven mainly by capacity constraints, but remains well ahead of 2019. Additional capacity will come on stream in the third quarter of this year. In South Africa, net revenue also grew in the 30s, driven by the recovery in volume, cycling the COVID measures last year, and assertive price increases ahead of the industry. Total volume is now ahead of 2019 by a high single digit, despite supply chain challenges. Moving on to the Americas, net revenue grew organically by 15.8%, mainly driven by Mexico and Brazil. Organic beer volume grew by 6.2% and mid-single digit ahead of 2019. Price mix on a constant geographic basis grew by 14.3%, driven mainly by pricing. Operating profit declined organically by 16.3%, as the region was disproportionately impacted by higher inputs and logistic costs, particularly ocean freight into the US, where our competitive position does not allow offsetting all this fully in price. In Mexico, net revenue increased organically in the mid-teens, driven by pricing ahead of the industry amid single-digit volume growth. The premium portfolio grew volume in the mid-teens, led by the success of Bohemia Cristal and the continued momentum of Amstel Ultra. Our six stores continue to accelerate their growth, and we aim to close the year with more than 16,000 stores. In Brazil, net revenue grew organically in the mid-30s, driven by pricing ahead of the industry, premiumization, and volume growth. Beer volume outperformed the market, accelerating its growth in the second quarter to the low 20s and growing in the low teens for the first half. Our premium portfolio grew volume in the 30s. Heineken remains the number one brand by value in the off-trade. Heineken USA net revenue declined slightly on an organic basis, basis as lower volume impacted by supply chain disruptions and the softer market were mostly offset by pricing. The disruptions have disproportionately affected Heineken and are expected to stabilize in the fourth quarter. Apologies. Heineken 00 continued to grow and lead to non-alcoholic beer category. Dos Equis grew volume in the low teens, benefiting from the recovery of the on-trade and the performance of Dos Equis lime and salt, INEQ USA launched its first ready-to-drink cocktail Dos Equis Classic Lime Margarita, and Lagunitas introduced this orderly teahouse. In Asia Pacific, volume development is building momentum and benefiting from cycling significant prior year restrictions. Beer volume grew 17% organically, 9.6% ahead of 2019. Strong performance driven by double-digit growth in most of our markets. Net revenue was up 23.4%, with price mix up 8.8% on a constant geographic basis, driven largely by pricing, with positive channel and premium mix. Operating profits increased 18.9% organically. Our growth momentum in Vietnam returned and was ahead of the market, driven by the strong volume recovery in the second quarter and pricing ahead of the industry, Overall, retaining our market leadership position, BFVS grew by over 50% to accelerate expansion outside our strongholds. In India, volume recovered ahead of pre-pandemic levels, despite supply chain restrictions during the peak season and pricing ahead of the industry. The premium portfolio outperformed, led by Kingfisher Ultra and Amstel. Integration of United Breweries Limited is progressing, including the rollout of Heineken's operating principles and best practices. And in China, Heineken Original and Heineken Silver continued their strong momentum. Both grew in the 30s, despite lockdowns impacting the Southwest region. Moving to Europe, net revenue grew by 30%, with price mix up 17% on a constant geographic basis, driven by assertive pricing, positive mix effects from the reopening of the on-trade and premiumization. Operating profits grew organically by more than 60%. Beer volume increased organically by 7.9% versus last year and was ahead of 2019 by a low single digit. Beer volume in the on-trade was up in the high 70s as the channel reopened across the region, but remains below 2019 by a high single digit. Over the last quarter, we observed a steady 85 to 90% of the outlets reopened versus 90. Off-trade volume declined by a mid-single-digit versus last year and remains ahead of 2019 by a high single-digit. We gained or held share in over two-thirds of our markets, and the premium portfolio grew by a high single-digit, led by Berra Moretti and the launch of Heineken Silver. We see an increasing risk of disruption to the supply of natural gas in Europe. In anticipation, we have anticipated our contingency plans, and Harald will speak more to this in a moment. Let's move on to some highlights of our sustainability program. We are making steady progress against our Brew a Better World strategy, focusing on three areas, raising the bar on climate action, accelerating our social sustainability agenda, and driving our brands to advance the moderate consumption of alcohol. We're building momentum and are pleased with our progress, but we also recognize there's still a long way to go. We've all seen in the news, the scores of wildfires, floods, droughts, and heat waves, which have been intensified by climate change. We're determined to play our parts in helping to keep temperature increase within the 1.5 degree limit and remain committed and clear in our ambitions to achieve our goals. Along our journey to become net zero in our entire Value Chamber 2040, roadmaps have now been developed with all our largest operating companies, which account for 75% of our total emissions. We are proud of the steps taken so far. For example, in South Africa, we recently launched the largest solar plant in the African beer industry, reducing the brewery's carbon impact by 30%. Regarding healthy watersheds, we're stepping up our water efficiency efforts and two new wastewater treatment plants were installed at our breweries in Serbia and Haiti. And with that, I would like to hand over to Harald to share with you a bit more color on our financials.