Heineken Holding

Good afternoon, everybody, from Amsterdam. Thank you for joining us for today's live webcast of our 2024 full-year results. Your hosts will be Dol van den Beek, our CEO, and Harold van den Boek, 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 Dolf. Dolf?

Thank you, Tristan. Welcome, everyone. Last year, we delivered a solid year, demonstrating momentum and progress on our multi-year strategy, Evergreen. Before we delve into the results, let's start with a brief reminder of our strategy, which continues to shape our business. Our ambition is to deliver superior balance growth to consistently create long-term value. We do this with a clear focus on five strategic priorities embedded in the business as indicated on the left. These priorities propel the flywheel of our growth algorithm. We've had to top first and foremost growth. We're targeting superior and balanced growth, both volume and value growth. Growth enables gains in productivity and this in turn fuels resources for investing in further growth and to improve profitability. And this year, that certainly has delivered the balance embodied in our Green Diamond. We delivered growth, balance between volume and value, continuous productivity, better capital efficiency, and made progress against our ambitions on sustainability and responsibility. Let's take a closer look at our key highlights of the year. First and foremost, we achieved broad-based beer volume growth in all four regions. We gained or held volume market share in the majority of our markets. We made a meaningful material step up in marketing and selling investments behind our brands and invested significantly more behind our digital and technology platforms, supported by our productivity programs. At the same time, we were able to deliver strong profit growth with strong cash flow generation. This has enabled us to increase our cash returns to shareholders, including a dividend in excess of 1 billion and a new 1.5 billion share buyback program, which Harald will discuss in more detail. Additionally, as we look ahead to 2025 and taking into account macroeconomic and geopolitical uncertainties, we expect operating profit value next year to grow organically in the 4% to 8% range. So let's take a look at our financial highlights. Net revenue Bayer grew 5% organically versus last year. Significantly, our growth was balanced and broad-based as net revenue per hectare to Bayer grew 3.5%, while total beer volume was up by 1.6%. The momentum behind the Heineken brand continues with 8.8%. Operating profit Bayer grew by 8.3%, and the margin was 15.1%, up 40 basis points versus last year. Notable was the strong improvement in the Americas. Net profit buyer improved by 7.3%, with the growth coming mainly from the strong performance in operating profit. Diluted EPS buyer landed at €4.89. Harald will cover this in more detail later. The delivery of our growth has been balanced, and moreover, the volume growth itself has been of high quality. Mainstream brands grew slightly ahead of our total portfolio, led by the big brands in our biggest markets, including Kingfisher in India, Cuscampo in the UK, and Amstel in Brazil. Our premium beer brands grew 5%, more than triple the rate of our total beer portfolio. The growth has been delivered by a wide range of premium brands and extensions across our regions, including Kingfisher Ultra in India, Birra Moretti in Europe, Dos Equis in the Americas, and Desperados in Nigeria. And of course, led by Heineken, which was up almost 9%. The growth was broad with 24 markets in the double digits, most notably in Brazil, China, and Vietnam. Additionally, Heineken 0-0 grew 10%. This high-quality volume growth led to a 5% net revenue buyer growth with positive price mix in all regions. Operating leverage led to good revenue-to-profit conversion with operating profit buyer growth over 8%. Now, let me take you through the performance in our regions. First, Africa and Middle East, where we achieved volume growth and successfully navigated volatility under challenging conditions. Net revenue Bayek grew organically by 24.5% with 3% beer volume growth and a strong price mix of 21%, mainly by pricing for inflation and currency devaluation. operating profit by equal 31% as pricing, accelerating volume growth, and continued productivity gains more than offset cost increases. In Nigeria, we successfully navigated high inflation and severe currency devaluation, actively adapting our cost base. Despite difficult economic conditions, I'm pleased how the team grew volume in the teens and gained overall share. Gold beer grew volume in the 30s and Heineken and Desperados led the growth in our premium portfolio. We're competing and winning with a diverse range of drinks, beer and beyond beer. Our non-alcoholic malts performed strongly and with the addition of distilled Nigeria, we expanded our portfolio to include fast-growing wine and distilled spirit brands. Also in South Africa, We completed the integration of Distel, positioning us as a strong challenger with a competitive multi-category business model. Beer is back in growth, supported by the launch of the 65CL returnable glass bottle for Heineken. Our Beyond Beer portfolio, led by Savanna and Bernini, continued their strong momentum. In our Wine and Spirits portfolio, we have seen some solid growth from key brands such as JC LaRue, Amarula, and ClipDrift-friendly as we use our full platform to drive the growth. Elsewhere in Africa, we took effective pricing in Ethiopia to protect profitability before and after a steep local currency devaluation. It's also worth calling out the strong performance in Egypt, our latest market to implement our digital backbone, to which I will return later. On to the Americas. which really stood out due to its strong operating profit performance, while funding a significant step up in marketing investment. Net revenue by a good 3% and bear volume up a percent. Price mix grew by 3% benefiting from pricing and premiumization. Operating profit by a good 24.5%, supported by a better portfolio mix and productivity savings. In Mexico, we delivered strong operating profit growth, benefiting from the productivity programs. We also invested back in the business, both in marketing and in our production footprint, as we started construction of our new brewery in Yucatan. During the year, we had solid volume growth. Tecate Original and Dos Equis grew volume mid-single digit and high single digit, respectively. Indio grew in the teens, leveraging its deep roots in Mexican culture. In Brazil, we maintained and expanded our leadership in the premium category as we further stepped up investment behind our brands. Heineken achieved its 11th consecutive year of double-digit growth. In mainstream, Amstel is now a top five brand in Brazil, doubling its volume over the past three years to 11 million hectoliters. In a challenging U.S. market, our market share remains stable with Heineken 00 recorded its sixth year of consecutive growth. Elsewhere in the Americas, we achieved growth and share gains in Panama, Peru, and Ecuador. So moving on to APEC, where we significantly stepped up our marketing investment to set up the region for further growth. Net revenue by a group by 5%, beer volume by 4%, and price mix 1%. Operating profits increased by 2%. In Vietnam, the market returned to growth in both the on and off-premise channel by the end of the year. The Heineken brand grew volumes in the 50s, led by Heineken Silver. During the year, we actively adjusted our portfolio as channel dynamics evolved. This has led to our mainstream brands to grow in the double digits, with Biafiet up almost 60% and Leroux Smooth growing and gaining share in central Vietnam. In India, volume was up by a high single digit as our momentum continues, underpinning our belief in the future potential of this market. The premium portfolio grew in the 30s, gaining share in the segment, led by Kingfisher Ultra and Ultra Max. In China, Heineken continued its strong growth trajectory in the premium segment. Volume was up in the high teens, driven by the strong momentum of both Heineken Original and Heineken Silver. Elsewhere in Asia, Cambodia volume declined, pressured by challenging conditions in a declining market. In Laos, we gained significant market share as we grew beer volume by more than 60%. Now on to Europe, where we are focused on investing behind our brands and transforming our portfolio to refuel growth. Net revenue buyer declined by 1.5%, partly due to lower intercompany exports, with both price mix and volume slightly positive. Productivity savings financed our step-up in marketing and ensured price and promotional competitiveness, whilst also enabling operating profit buyer to grow 2% organically. We gained or helped market share most of our markets, most notably in the UK, where our full innovation-led portfolio delivered shared gains, to which I will return in a minute. In Western Europe, consumer sentiment impacted our growth, though pricing remained stable after the sizable increase last year. We had strong growth in our next generation brands, such as Calia in France, El Aguila in Spain, Tessels in the Netherlands, and Desperados more broadly in Europe. The non-alcoholic beer and cider portfolio grew by a high single digit, led by Heineken 00. Elsewhere in Europe, both revenues and volumes were good, notably in Southeast Europe, with strong performances in the Czech Republic, Greece, and Croatia. I wanted to return to the UK, where we continue to gain both significant volumes and value share in both on- and off-premise channels. We have transformed our business to ignite growth through different levers of our portfolio. Bira Moretti is the leading lager brand on draft in the UK and continues to drive the growth. With the introduction of Bira Moretti Salle di Mare, we had one of the biggest innovations in the beer market over the past year. B for Time is now the leading craft brand in the UK, led by Neko IPA, which had another year of on and off trade share gains. Inches and Old Moods are growing double digits, further premiumizing the cider category. Cuscombo, with which the most successful UK alcoholic beverage launch is over a decade, underpins our double-digit growth in the mainstream segment. We've continued to innovate on Foster's, recently with Foster's Proper Shandy, and signing a multi-year partnership with the professional Darts Corporation. Darts has become the most watched sport on British TV after the Premier League. We have invested more than 200 million pounds revamping our 2,400 strong pub estate in the past five years, providing great surroundings and high quality experiences. As such, our pub estate has significantly outperformed the wider pubs market. More broadly, We were rated by the Advantage Group as the best supplier to all on-trade customers and the number two supplier across all CPT players by grocery customers. Moving on to Brand Heineken, leading once again our portfolio. The sustained momentum behind the Heineken brand continues to pace. The innovations of Silver and ZeroZero have been additive to growing the brand power and volume of Heineken original. Total Heineken has grown 75% since 2018. Heineken's growth continued into 2024, adding another 9% of growth with 24 markets in the double digits. Most notably in Brazil, China and Vietnam. Heineken Zero Zero and Heineken Silver have been once again strong contributors, up 10 and 34% respectively. I'm also especially proud that the Heineken brand continues to be admired for its creativity in both idea and execution. Our award-winning campaigns celebrate social moments around our brands, and we continue to leverage global partnerships, including Formula One and both the men's and women's UEFA Champions League. Let's dive a bit deeper into Zero Zero. We continue to be the global leader in the non-alcoholic beer, a category that delivers growth, profitability, and moderation. Since the launch of Heineken Zero Zero in 2018, we have captured more than 40% of the total global growth of the non-alcoholic beer market, three to four times our fair share. Heineken Zero Zero is the largest global brand in zero alcohol, having revolutionized the category. It's now available and admired in 117 markets, growing by double digits in 28 markets this year. Moreover, we continue to introduce Zero-Zero variants of our key brands, amongst more recently Son-Zero in Brazil, El Aguila Sinfiltrar Zero-Zero in Spain, a broad range of Sea-Wet Zero-Zero flavors in Poland, and Desperado Zero-Zero more globally. I wanted to reflect on the significant investments we are making this and the coming years, enabled by our productivity initiatives Harald will touch upon later. This year, we stepped up our marketing investment by double digits, investing 3 billion in total, or almost 10% of the revenue behind our brands. In every one of our regions, our investment in marketing was ahead of revenue growth OG. We're building new greenfield breweries in markets with strong growth potential, including Mexico, Brazil, and with our JV partner in Dubai. And we are investing significant sums behind our digital technology programs, including our eB2B platform, connecting over 700,000 customers in fragmented traditional channels, reaching $13 billion in gross merchandising value in 2024. Our multi-year digital backbone program that simplifies back office processes whilst building a global data foundation and unlocking the value of that data, which we level throughout the business by leveraging artificial intelligence from our connected breweries to our shared service centers. We are truly building, investing, and future-proofing our business, not just for the next year, but for the next generation. And of course, When looking at future-proofing our business, Brew a Better World, our strategy to deliver on our environmental social responsibility ambitions, where we are progressing across all three pillars. In our ambition to achieve net zero carbon emissions in scope one and two by 2030, we continue to make progress. Reduced our emissions by 34% in the last two years. On our journey towards healthy watersheds, we improved water efficiency across all our breweries to 3.1 liters per liter of beer produced, and now have over 36 water balancing projects. On the solar pillar, we achieved our targets of at least 30% women in senior management roles by 2025, a year early. On responsible consumption, as I indicated earlier, as category leaders, we continue to make progress to make sure that zero alcohol options are always a choice and broadly available. And with that, let me hand over to Harald to discuss the financial highlights. Harald.

Thank you, Dolf, and good day to you all. I'll first take you through the main items of our financial results, then come to our share buyback announcement before closing with our outlook for 2025. Starting with our top line performance on slide 17. We posted an organic growth of 1.5 billion, or 5%, delivering 30 billion of net revenue by year. In the year, we delivered a good balanced growth, with volume, pricing, and a positive mix effect for premiumization. Total consolidated volume on an organic basis grew 1.4%. Beer volume grew in all our regions, as Dolb indicated, in line or ahead of the category in the majority of our markets. Lower third-party volumes partially offset our beer volume growth, particularly in our wholesale network in Europe. Net revenue per hectolitre increased by 3.5%. The underlying price mix on a constant geographic basis was 4.1%, with a price component of 3.7%. Price mix improved in all our regions, more pronounced in Africa and the Middle East, and especially in Nigeria, to offset inflation and currency devaluation. Currency translation dampened net revenue buyer by 1.65 billion, mainly from the devaluation of the Nigerian Naira and depreciation of the Brazilian Real and the Mexican Peso. The consolidation effect had a net negative impact, primarily due to our exit from Russia and the sale of Rumona, more than offsetting the acquisition benefit of Distil and Embraer Brewery. As we move on to the next slide, we delivered 4.5 billion of operating profit value, growing 8.3% organically and representing an operating profit margin value of 15.1% at 40 basis points versus last year. The 1.5 billion of organic net revenue buyer growth on the previous page translated to 367 million organic operating profit growth, a conversion of 24%. Pricing and strong growth moderate total cost inflation and investments. Our variable cost per hectolitre decreased organically by low single digits as lower commodity and energy costs in the Americas and Europe more than offset a double digit increase in Africa and the Middle East. The latter driven by high local inflation and exchange rate devaluations in key markets such as Nigeria and Ethiopia, for which we successfully priced. Marketing and selling investment as a percentage of net revenue BAYA reached 9.8%, up 70 basis points compared to the prior year and reflecting an organic increase of almost 300 million. All regions invested in marketing and sales at a faster rate than their revenue growth. Whilst all regions contributed to the organic growth in operating profit BAYA, the Americas region was the main contributor, up 24.5%. Next to top-line growth leverage and positive portfolio mix, variable expenses benefited from lower commodity costs. In addition, and proportionally more significant, margins improved due to structural productivity savings that delivered outstanding results, especially in Mexico and Brazil. For instance, we made major steps in nearshoring and local sourcing, collaborating with strategic suppliers, We were also able to systematically lower our distribution costs and deliver meaningful fixed cost productivity. The Africa and Middle East region achieved the pricing needed to offset the impact from inflation and transactional currency effects. Volume growth provided leverage, and together with impressive productivity savings, including sharper choices in capital expenditure, reflecting a more uncertain environment, this flowed through to operating profit-buyer growth. In Asia-Pacific, good performance from India in the top-line recovery in Vietnam contributed to operating profit buyer growth, partially offset by reclining Cambodia. In Europe, we reinvested the majority of lower variable cost and productivity gains behind growth and competitiveness, noticeable in our market share trajectory, and still delivered a 35 basis points positive operating profit improvement. Consolidation changes had a negative impact of 62 million, primarily due to our exit from Russia and the sale from Fomona. The translational currency effect was 236 million negative, mainly from the devaluation of the Naira in Nigeria and depreciation of the Mexican peso and the Brazilian real. We achieved over 600 million in gross savings in 2024, surpassing our half a billion target. Approximately 40% of the growth savings were delivered by our supply chain operations over the year, proven to be a continued source of productivity. Secondly, strong supplier collaboration and a series of new procurement initiatives delivered another 40% of the aggregate growth savings. The remaining came from initiatives related to fixed-cost optimization. A few specific examples. In Europe, countries closely collaborated as we progressed with our supply chain transformation and brewery network optimization. We rolled out centralized demand and supply planning and transportation services, leveraging AI solutions and thus driving significant productivity. The Americas contributed a third of the saving, for instance, through portfolio harmonization and nearshoring in close collaboration with strategic suppliers, both enabling a more efficient value chain. predominantly in Mexico and Brazil. The productivity initiatives in Africa and Middle East helped us to remain competitive in a high inflation environment. The teams worked hard on right-sizing operations and leveraging digital for more efficient processes. This in turn led to a lower break-even point for our business, specifically in Nigeria, Egypt, and Ethiopia, with significant benefits when volume growth resumes. In Asia Pacific, our markets focused on design to sustainable value initiatives, as we harmonized our packaging range across the region, while still searching to pursue our needs. Adolf already mentioned, and depicted on the right side of the chart, these productivity improvements not only enabled a double digit increase in marketing and selling investments in support of growth, and helped fund the digitization of our business, but also, and importantly, helped improve productivity, profitability. Let me turn to other key financial metrics on slide 20. Our share of profit Bayer from associates and joint ventures grew 16.7% organically, reflecting the strong profit growth of our associates and joint venture partners in Chile, Costa Rica, and China. Net interest expenses Bayer increased organically by 12.7% to 543 million, reflecting an increase in our average effective interest rate to 3.5%, predominantly from higher interest of local borrowings in Nigeria. All the net finance expenses amounted to 271 billion, an organic increase of 12.1%, mainly caused by transactional foreign exchange, resulting from the devaluation of the Nigerian Naira and the Ethiopian Baird. and the depreciation of the Brazilian Real and the Mexican Peso. Net profit Bayer increased by 7.3% organically to 2.74 billion. The effective tax rate Bayer was 27.9% compared to 26.8% in 2023. This increase is primarily due to the tax law changes in Brazil that came into effect on January the 1st, 2024. All in all, this resulted in an organic EPS Bayer increase of 4.7% to €4.89. Given our solid performance and within our target payout range of our dividend policy, we will propose at the AGM of this year a dividend increase of 7.5% per share to €1.87. This equates to a negligent amount of 1.05 billion to be returned to shareholders through dividends. Finally, our net debt to EBITDA-BEI ratio was 2.2x, below the long-term target of below 2.5x. Let me now turn to free operating cash flow. We recorded the cash inflow for the year of 3.1 billion, a 1.3 billion increase from last year. As a reminder, our cash delivery in 2023 was relatively soft, so the improvement should be taken in the right context. This came from a big part from the circa 1 billion of working capital improvements, mostly from Europe and the Americas. Leaving the relatively easy comparator aside, we are pleased and encouraged to see results of specific interventions to enhance our capital productivity. A few examples. With advanced analytics, we are optimizing our way of working, leading to improved debtor management and cash collection practices in the Americas. We are gaining traction to use AI in our forecasting process, thereby optimizing purchasing and inventory levels. And we've been working with suppliers to bring our payment terms closer to industry standards. CapEx was just under 2.5 billion, lower than last year by 226 million, and representing 8.2% of net revenue Baina, below our guidance of 9%. We invested in additional capacity in Brazil, returnable packaging materials, for instance, in South Africa, and in a canned packaging factory in Mexico. We also allocated specific funds for sustainability investments, where we have now developed good practices to assess individual projects on technical feasibility and financial risk and return. Cash flow from operations before working capital changes was lowered by 43 million. Cash used for interest, dividends, and tax decreased in aggregate by 190 million, mainly from lower income taxes paid. Let us now turn to our capital allocation priorities. As a reminder, in our value creation model, we prioritize organic growth and this year we had a significant step up in reinvesting back in the business especially through higher marketing and selling investments and new capacity in key markets as I just mentioned. We do so within a disciplined financial framework with a prudent approach to debt. We remain committed to our long-term below two and a half times net debt to EBITDA ratio We maintain a consistent dividend policy, as we have for decades, paying out 30% to 40% of net profit value. As I said earlier, our proposed dividend will return over $1 billion of cash to shareholders. We also prioritize value-enhancing acquisitions to enhance long-term profitable growth. And as previously indicated, we consider additional capital returns, such as share-buying. In 2024, we achieved significant deleveraging, ending well within our target capital structure, supported by a strong free operating cash flow. Consequently, whilst we continue to invest in our business, we are well positioned to return additional capital to shareholders. And as such, this morning, we announced a two-year share buyback program, where we intend to repurchase own shares to an aggregate amount of $1.5 billion. Heineken Holding and Vee has committed to participate pro-rata to its shareholding based on their 50.005% ownership. Simultaneously, Heineken Holding has also announced a two-year share buyback program where they intend to repurchase up to 750 million of their shares. They will use the proceeds of its pro-rata participation in our program to finance their program. Both Heineken and Vee and Heineken Holding will cancel the repurchase shares, thereby reducing the number of outstanding shares and issued capital. Lars Green, Heineken's Holdings' largest shareholding, and ultimate controlling shareholder of Heineken NV, fully supports the program, but will not participate in the share buyback. Now, lastly, our outlook for 2025. We anticipate continued macroeconomic challenges, including weak consumer sentiment in Europe, volatility, inflation, and currency devaluations in developing markets, and geopolitical fluctuations potentially affecting our consumers. The 2025 outlook reflects our current assessment of these factors as we see them today. For the full year 2025, we foresee continued volume and revenue organic growth. However, good to mention that the first quarter will face a high comparison base and be impacted by technical factors, such as fewer selling days and the timing of Easter and death. We expect our variable cost to rise by a mid single digit per hectolitre, excluding Africa and Middle East, however, where higher local input cost inflation and currency devaluation persist variable costs are expected to increase by a low single digit per hectolitre. Our continuous productivity programme aims to deliver at least 400 million of growth savings in 2025, funding growth, digital transformation and sustainability initiatives. As it did this year, we intend to further increase in support of our brands and for marketing and selling expenses to grow ahead of revenue. Overall, we expect to grow operating profit buyer organically in the range of 4% to 8%, with the risks and opportunities we see in the upcoming year incorporated in both ends of the range. With a more stable set of finance expenses and tax rate, we expect organic net profit buyer to be broadly in line. Before we go into Q&A, just once again to summarize. A solid year for Henrik. We achieved broad-based bear holding growth in all four regions. Our strong productivity program enabled us to materially step up our investments in marketing and sales and support our digital and technology journey. We delivered strong profit buyer growth and cash flow generation, allowing us to increase cash returns to shareholders. And as we just showed, we expect operating profit buyer organically in 2025 to grow in the range of 4% to 8%. With that, we're happy to take your questions.