Heineken Holding

Good afternoon, everyone. Thank you for joining us for today's live webcast of our 2024 first quarter trading update. Your host will be 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 involve known and unknown risks and uncertainties, and it is possible that the actual results may differ materially. For more information, please refer to the disclaimer on the first page of this presentation. I will now turn the call over to Harold.

Thank you, Federico, and welcome everyone. Thanks for joining us today. And again, I refer to the fact that we don't want to make it a habit to host conference calls with our trading updates. Here again, we wanted to give some additional context and offer you the opportunity to ask some questions. Let me take a few minutes to give you a summary of the quarter and importantly, how we are thinking about the performance relative to the rest of the year. The first quarter marks an encouraging start to the year, with all four regions returning to volume growth as we continue to focus on our evergreen priorities. Volume trends are sequentially improving across the majority of our markets, And in the majority, we are gaining or holding volume share on a year-to-date basis. The top line delivery was well balanced between volume and value, and our underlying premiumization trends remain strong. We are not changing our full year expectations. We have noted consensus estimates converging within our range, and we remain comfortable with that position. Let us now look at some key highlights. Group net revenue buyer was 6.8 billion euros, an increase of 9.4% organically, with net revenue buyer per hectolitre increasing by 4.9%, mainly driven by pricing in line with inflation, with Africa Middle East ahead and Europe and America somewhat below this inflation point. Beer volume was up by 4.7% organically, driven by a premium beer portfolio, which grew by 7.3%. Brent Heineken was up by almost 13%. The volume performance this quarter was boosted by calendar effects like an earlier Easter and cycling negative one-off effects from last year, such as the destocking in Vietnam and the shortage of bank notes in Nigeria. Adjusting for these effects, beer volume grew around 2%. Looking at the first three months, we posted an organic growth of 600 million or 9.4% net revenue buyer. Total consolidated volume on an organic basis was up 4.3%, with all regions contributing to growth. The underlying price mix on a constant geographic basis was up 6%, and this is ahead of net revenue buyer per hectolitre because of the dilutive geographical mix impact. as net revenue per hectolitre on a BEA basis, for example in Brazil and in India, are below the Heineken average. Mix was broadly stable in the quarter, as the positive contribution from premiumisation was offset by net first channel mix versus last year, with the on-trade softer compared to the previous period last year. The translation of foreign currencies had a negative effect of 294 million euros, or 4.6%, mainly driven by the devaluation of currencies in Africa, particularly the Nigerian Naira, and partially offset by a stronger Mexican peso and the Brazilian rail. Consolidation changes in net revenue Bayer contributed 164 million euros, driven by the integration of the Stella Namibian breweries and partially offset by the sale of Fremona in the Netherlands and our exit from Russia. Let's have a closer look at the volume trends with an updated chart we used at our full year results. As a quick reminder, it shows the volume organic growth rates for our beer portfolio and separately the beer and premium beer portfolio, excluding Vietnam and Nigeria. You will recall that after the full impact of our pricing actions took effect in the second quarter last year, we saw a moderate sequential improvement quarter by quarter as inflationary pressures mitigated and our pricing tapered. In aggregate, these trends continued into the first quarter, with more markets returning to growth and gaining or holding market share on a year-to-date basis. Premium beer also continues to outperform in total and in the majority of our markets. As a reminder, Nigeria and Vietnam now cycle the significant negative one-off effects in the prior year, hence the effect also this quarter, as you can see in the chart. Furthermore, the quarter was boosted by the calendar effects, including an earlier Easter period, an extra day in the leap year, and the later timing of the Lunar New Year. Therefore, we believe this growth should not be simply extrapolated for the remainder of the year. Let's now take a closer look at the regions. And let me start with Africa Middle Eastern. Net revenue Bayer grew 32.9% organically with total consolidated volume up 5.6% and the price mix on a constant geographic basis up 26.7% driven by strong pricing across the region to offset inflation and currency devaluations. Beer volume increased organically by 3.5% as some markets cycled these significant disruptions from last year. And we operate in a context of continued economic volatility and challenging consumer conditions across the region. Premium beer volume grew by a low single digit, driven by desperadox. In Nigeria, consumer purchasing powers continue to be under severe pressure due to inflation and the impact of recent structural economic reforms. Nonetheless, total volume grew close to 20%, benefiting from cycling of the prior year disruptions I've spoken about, which impacted also at that time significantly consumer purchasing behavior. Our volume is close to 10% lower. The premium portfolio grew by a high single digit led by Desperados, and in April, Nigerian breweries announced a rights issue, taking a step to strengthen its balance sheet given the current economic challenges. Heineken will take up its full right in the forthcoming recapitalization, as we believe in the longer-term future of the business. In South Africa, the beer volume was up by a low single digit, recovering further in the market or being still behind the total alcohol market. Revenue grew by a high single digit, driven by pricing and positive mix effects. The non-beer portfolio grew near revenue by close to 10%, driven by a strong performance of Savannah, Bernini and Four Street wine. This is relative to the historical baseline of the Distel portfolio. Let me move to the Americas. Net revenue buyer grew 6.5% organically, with the total consolidated beer volume up 5% and a price mix on a constant geographic basis of plus 3.4%, led by pricing and the continued premiumization of the portfolio. Brazil, Mexico, Panama, Ecuador had strong growth in the quarter, and our premium portfolio grew by a high single digit, led by Heineken. In Brazil, the growth again was led by Heineken, but also Amstel. And in aggregate, our value share is in line with the market as our successful portfolio and route to market strategy continues to deliver. We are proud that Heineken became the number one brand by value in the market. In Mexico, growth was in line with the market led by Tecate and Dos Equis. And we continue to see share gains during the quarter in the USA. with Heineken growing in brand power and performing ahead of the market, aided by the launch of Heineken Silver and the continued momentum of Heineken 00. In Asia-Pacific, net revenue Bayer increased by 11.3% organically, with consolidated beer volume up 9.4% and price mix on a constant geographic basis up 3.1%. The premium portfolio was upped by low teens driven by Vietnam, India and Laos. In Vietnam, we estimate that the beer market declined by a mid-single digit, given the continued soft consumer environment and the stricter enforcement of the zero tolerance whilst driving regulations. We outperformed the market during the crucial TET festive period and maintained market leadership in aggregate and in the premium segment on a year-to-date basis, according to our data source. However, there is more to do in this very competitive market. Our net revenue Bayer was up in the mid-teens, driven by volume growth in the low-teens on a sell-in basis, cycling the destocking effect from last year. Heineken had a strong performance, driven by the momentum of Heineken Silver. The APEC volume performance was supported also by a very strong performance in India, with beer volume up in the low-teens ahead of the market. You will recall that last year we suffered somewhat from route to market changes. And finally, a word on Europe. Net revenue, Bayer grew 0.4% as beer volume increased 1.6% organically, with growth across the majority of the markets supported by an early Easter. Price mix on a constant geographic basis was up 1.7%, mainly driven by moderate pricing, partially offset by a net first channel mix and a normalized level, of our promotional activities. The growth was driven by the off-trade up by a low single digit, as on-trade volume was down by a low single digit. Net revenue buyer for the region was impacted by lower intercompany exports, mainly to the US and South Africa. Let us now move on to discuss the Heineken brand performance in more detail on a few words. The Heineken brand continued to show great momentum and grew volume 12.9%, with double-digit growth in more than 30 markets. The brand saw its strongest growth in China, up in the low 40s, and Brazil, up in the high teens. The growth was supported by a strong performance of airline extensions. Heineken 00 grew close to 19%, double-digit growth in all regions, and Heineken Silver grew by more than 50%, led by Vietnam and China. Moving on to the last slide with some final remarks. Our Evergreen strategy aims to create long-term sustainable growth and value creation, and a quarter is a short time period to assess our progress. We remain cautious in our outlook as we continue to see economic environment as challenging and uncertain. We will continue with the structural changes under Evergreen to set us up for more balanced growth this year and beyond. We will continue to invest in future growth, the continuous renewal of our portfolio towards premiumization, non-alcoholic and beyond beer, and our ambition to become the best connected brewer. We will also invest behind sustainability and responsibility objectives. Barring any unforeseen significant disruption to our markets, we expect a more balanced delivery of operating profit buyer than we had in 2023. with growth in both halves of the year, albeit skewed towards the first half. All in all, we continue to expect operating profit buyer to grow organically by a low to high single digit, and net profit buyer organic growth lower than the operating profit buyer organic growth. With that, I'd like to open the line for Q&A, and thank you for listening.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask you please unmute yourselves to one question and one follow-up. Our first question today goes to Edward Mundy of Jefferies. Edward, please go ahead, your line is open.