Heineken Holding

Good morning all and welcome to today's Heineken half-year 2026 results call. My name is Seb and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. In the interest of time and fairness, we ask that you limit yourself to one question and one follow-up each. I will now hand you over to Tristan Van Strien, Director of Investor Relations. Please go ahead.

Thank you, Seb. Good morning, good afternoon, and good evening, everyone from Amsterdam. Thank you for joining us for today's live webcast on our 2026 half-year results. Your host will be our CFO and member of the Executive Board, Harold van den Broek. Following the presentation, we will be happy to take your questions, as Seb mentioned. The presentation includes expectations based on management's current views and of all 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 over the call to Harold.

Thank you, Tristan, and good day to you all. Let me take you through the results for the first half of 2026. First, a brief reminder of our Evergreen 2030 strategy. To create sustainable value, we focus on three strategic priorities, growth, productivity, and future-fitting Heineken. Growth is our number one priority, and we build balanced, sustainable growth through our global and local power brands and prioritize markets where we see the greatest long-term potential. Productivity and capital efficiency are important enablers to fund the right growth investment, strengthen profitability, and improve shareholder returns. and we continue to future-proof the business through digital and AI enablement, sustainability and responsibility, and creating the right organization and talent base. We measure our progress along the four dimensions on our green diamond in pursuit of attractive shareholder returns. The first half results show ample proof points of how execution of our strategy are delivering quality results. And let me therefore start with the highlights. We delivered quality growth with volume momentum improving through the half, driven by strong performances in the APEC and Africa Middle East regions, and recovery in Europe. Let me say upfront, we are not satisfied with our America results and the necessary actions are taken to improve that. Our total volume growth was driven by our five global brands and top 25 local power brands, with our focus markets delivering more than double the Heineken average growth rate. Cash conversion was strong, helping fund attractive acquisitions such as FIVCO, an increase in interim dividend and a continuation of our share buyback program. And we progressed with pace on the Evergreen 2030 change priorities, innovation, digital and AI enablement, operating model simplification and Heineken Business Services. Profitability was robust, supported by broad-based productivity and leading to a margin expansion. We reduced around 3,000 FTEs in the first half, materially advancing our planned organizational changes. We are confident in our strategy and progress. yet remain prudent given ongoing macroeconomic and geopolitical uncertainty and therefore reiterate our full-year operating profit growth guidance of between 2 and 6%. Let's now turn to some numbers with the financial highlights. We delivered total volume growth of 1.6% led by Heineken and with strong profitable contribution from licensed partners in China and India. Net revenue grew 2.7% on a consolidated volume basis, with net revenue per hectolitre up 2.3%. Operating profit increased 6.7%, with operating profit margin expanding by 55 basis points. Net profit was up 10.2% and deleted EPS came in at €2.29, an 11.6% increase on a constant currency basis. The first half, therefore, shows balanced delivery. Volume growth, value growth, profit expansion and stronger cash flow generation. The quality of our growth is visible across the portfolio. Whereas total mainstream volume declined slightly with more work to do on that, and as an aside, mainstream grew in our focus markets, Total consolidated volume grew 0.4%, total volume by 1.6%, global brands by 5.3%, and premium volume by 5.8%. A strong result also from Heineken 00, up 7.2% and Beyond Beer by 7.7%. And this is the balance we want. Growing volume, improving value, and allocating resources where we see the strongest long-term growth opportunities. The right side of the chart shows the operating leverage coming through with 6.7% operating profit growth and net profit growing double digit and EPS as Jens mentioned ahead of that. Let's turn to our flagship brand Heineken, which again led the premium growth of this half year with 5.3% of total volume growth and 18 markets in double digit growth momentum. Heineken 00, as mentioned, grew 7.2%, showing the continued relevance and the long-term potential of the no alcohol category, which in aggregate in our portfolio was up 7.5% in volume. The ongoing success of Heineken Silver continues, growing 34.5%, particularly in APAC, led by Vietnam and China. You've perhaps noticed the beautiful picture on the left of the expanded Heineken product family, now including our recent innovations as we meet evolving consumer needs as the leading global premium beer brand. We launched Heineken 00 Ultimate in the US, zero alcohol, zero carbs, zero sugar, as well as flavored 00 propositions. and launched Heineken 3.5% Ultimate in Brazil, a lower alcohol, gluten-free proposition where our consumers can enjoy everything you want in a beer and nothing you don't. We are proud that Heineken was named Creative Brand of the Year at the Cannes Lions International Festival of Creativity, becoming the first beer brand to receive this distinction. The award recognized the strength of our campaigns which build on the brand's purpose of bringing people together. The long-term sustained success of Heineken brand is no coincidence. And that's why we are now having started to apply the Heineken brand model on our global brands to unlock their full consumer potential across our markets. Let's therefore turn now to our global brands for a minute. We are pleased with the performance all in growth this half year and in aggregate delivered 5.3% volume growth. And a few highlights outside of the Heineken brand that I just touched upon. Amstel growth continued strongly, led by China, Brazil and South Africa. And Amstel Ultra is now the leading Ultra brand in Brazil. Tiger returned to high single-digit growth, led by Tiger Crystal in Vietnam, as well as strong consumer activations in Myanmar. Biro Maretti did well in Europe, particularly in Switzerland and France. And Desperados continued to build relevance with Gen Z consumers. More and more we see the potential of this brand coming through in the markets. The consumer pool is obvious and the common thread to unlock the potential is sharper focus, clearer brand governance, more disciplined resource allocation and differentiated execution across markets. Let's for a moment double click on Desperados. Desperados is a good example of how we are recruiting consumers with our Beyond Beer portfolio. Desperados is our leading Gen Z brand in Beyond Beer. The proposition is built around flavor, variety and flexible social occasions, exactly the spaces where our consumers are looking for more choice and more excitement. There is an innovation model behind it. Beyond the core proposition, we are extending the brand into new consumer opportunities with Desperados Sunlight, which targets lighter alcohol daytime occasions, and introduce more experimental concepts from our consumer experience center, La Fabrica, such as Freeze and Pico, a Desperados essence shot for a different kind of vibe, which our consumers were able to enjoy across festivals in the summer. The early proof points are encouraging. In the first half, Desperados grew high single digit, driven by strong performances in France, the Netherlands and Spain. In Africa and Middle East, the brand also grew strongly, led by Nigeria and Ivory Coast and supported by the recent launch in Ethiopia. Desperados is establishing a following based on a repeatable platform, a distinctive brand, a clear Gen Z attraction, flexible flavor-led innovations relevant from Europe to Africa with more to come. Innovation is how we bring growth and excitement into the category. It is beyond introducing products to consumers. We are systematically changing our innovation approach. With consumer-relevant insights, we are developing, testing and executing faster with more discipline, focused pilots, speed learning and scaling what works. In the first half, we executed more than 40 pilots across global brands, local power brands and new growth phases. On global brands, examples include extensions on the Heineken, including Ultimate 00 and new Heineken 00 flavors such as Nectarine Juniper and Cold Pressed Lime. From Heineken Studio, we crafted Heineken Whip Pills in the Netherlands, named Heineken Blonde de Bleu in France. On local power brands, we scaled innovations such as Cruz Campo Sevilla Orange, Kingfisher Smooth and Takato Titanium. We innovate across channels and for new occasions. For instance, we introduced the old mild flavor wave draught system that offers exciting consumer flavor choices, yet does so efficiently for publicans in the on-trade. With Heineken Costa Rica, we acquired not only a great business, but also strong innovation capabilities, showcased by Vida, a functional sugar-free non-alcoholic drink that we launched in the market. In the UK, we are pioneering with outdoor brewing, zero-zero beer that hydrates with magnesium and vitamin C, low in calories and gluten-free. And we are innovating in the aperitivo occasion in, where else, Italy, with our beautiful Sicilian brand, Birra Messina. As you see, we systematically accelerate innovation to respond faster to evolving consumer needs, exciting consumers with new experiences, and scale what works with more discipline. On brewing a better world, we have sharpened the agenda around the areas where we can have the greatest positive impact and support long-term sustainable growth of Heineken. On responsibility, we are increasing choice through low and no alcohol and continuing to invest in responsible consumption campaigns. On social impact, we are strengthening our diverse talent base and focusing on community impact with practical support for hospitality workers and entrepreneurs. On environmental progress, we continue to decarbonize our operations and improve water resilience, including additional water balance sites and renewable energy milestones in Europe. In all of these priority areas, we are continuing to make substantial progress towards our longer term ambitions. If we now move to the regions, starting with Africa and Middle East, which delivered a strong first half, with net revenue up 8.2%, total volume up 2.9%, a price mix of 7%, and operating profit up 30.8% with hard currency profit, supported by a transformed cost base and stronger balance sheet positions. In Nigeria, we delivered growth-based growth, and strengthened category leadership in what still is a challenged consumer environment. Through portfolio mix and strong cost discipline, operating profit grew in both local and reported euro currency. Heineken, Desperados, our stout portfolio and Maltina all maintained or strengthened their leadership positions. Heineken beverages continue to show multi-category progress. In South Africa, beer performed well, led by Amstel, now proud of the partnership with the legendary Orlando Pirates, but also with Heineken, Windhoek and Sol contributing. Bernini remained strong and ready to drink, and the wine portfolio was stable. In Ethiopia, we continue to reinforce our leadership in one of Africa's fastest growing beer markets. Revenue grew in the 30s with strong volume expansion led by Harar, Bedella and Heineken. And at Heineken, we have extensive experience in Africa. We understand the region has ups and downs, yet believe in the long-term potential of the continent. I mention this to emphasize that the strong regional performance we have now consistently seen for some time is driven by good foundations. category leadership positions, a strong brand portfolio, disciplined execution, and the sustained benefit of productivity actions taken over the recent years. Then on to the Americas. As said, we are not satisfied with our performance. Let me state that upfront and clearly, but we are also not structurally concerned. According to our data, consumer offtake in our three big markets was negative. Thank you very much. Let me give a few market specifics. In Mexico, volume was down in a soft market, with our performance improving during quarter two, setting us up for a better second half of 2026. To gather, our largest local power brand remains the focus of commercial and marketing activity, supporting by innovations next to Indio, our local heritage brand. Within premium, Miller High Life grew in the ITs. In Brazil, the category remained under pressure, down 3.6% for the first half of 2026, but trends improving during the end of the second quarter. Revenue grew low single-digit, driven by price mix. Operating profit expanded strongly through productivity initiatives and supply chain optimization following the opening of the Passos brewery. We launched Heineken Ultimate 3.5%, a gluten-free lower alcohol proposition with promising early results, while Amstel delivered growth and its ultra-variant continuing to lead in the ultra-segment. Costa Rica made a strong first contribution following completion of the acquisition on the 30th of January. Integration is ahead of plan, including synergy capture, and the business brings a strong portfolio and innovation agenda, as can be seen on the slide, with the new Imperial Michelada. All in all, a mixed performance, yet one we are confident to improve upon. The long-term potential of this region is undisputed, and we will continue to strengthen our portfolio and execution with appropriate investment to capture it. Asia-Pacific delivered excellent results, with net revenue up 10.5%, total volume growing 11.6%, a price mix of 4.5%, and operating profit up 17.7%. A quick obvious reminder that our strong China growth is not captured in our consolidated net revenue. Vietnam delivered record share in both the on and the off premise, driven by portfolio strength. We saw mid-single-digit category growth and our business momentum reflected the strong festive season in which our premium portfolio outperformed. We expanded national coverage and Heineken Silver had another outstanding half year. The Tiger brand was back to volume growth, led by Tiger Crystal. We also introduced Tiger Smooth, a 3.4% alcohol proposition built around a clear consumer need, a smoother, easy-drinking lager that stays true to Tiger's bold spirit. India continued to build on its leadership in a high-growth beer market. We grew total volume high single digit as we leveraged our scale and national footprint as market leader, with premium growth led by Kingfisher Ultra and Heineken Silver. and in China our growth momentum continued, now eight years in a row, in great partnership. Our portfolio of Heineken Original, Silver and Amstel grew close to 30% and China remains a top three market contributor to net profit in the first half of the year. This is a good example of the quality of growth we are targeting. Strong market positions, premium momentum and disciplined execution in high potential markets. With discipline on cost and cash, a very strong value creation engine. Let me double click on Vietnam and India, because these are two strong examples of where our advantage positions in Asia Pacific are compounding over time. And starting with India, we are the clear leader at scale. We combine Kingfisher, India's strongest national beer brand, with international premium brands such as Amstel and Heineken, and we operate the broadest commercial and supply footprint in the beer industry. This nationwide presence, a balanced supply chain across owned breweries and long-term licensed partner brewers, gives us a great platform as the category accelerates. The market is also benefiting from favorable consumer trends and a progressively more supportive operating environment for beer in several states, helped by Brewers Association's efforts to ensure quality operations and responsible category dynamics. We are investing behind that opportunity through premiumization, cold beer refrigeration and commercial execution at scale, supported by greenfield investments such as in Andhra Pradesh. In Vietnam, we are on track to build broad market leadership. The business now has record market share across both on- and off-premise, supported by national coverage and a differentiated portfolio across premium, mainstream, and value. Innovation and execution are also contributing, with Tiger Revitalized and stronger participation across locations and price points. Both markets show how stakeholder engagement, brand strength scale, route to consumer, supply chain and disciplined investment can compound overtime to unlock real market potential. Turning to Europe now. In Europe, results recovered, supported by strong activation, innovation and transformation. Net revenue during the first half of 2026 was up 0.1%, whilst total volume declined 0.6%, and price mix was flat. Operating profit grew 0.6%. Perhaps worth pointing out, improved momentum in quarter two, with volume positive 0.2% and revenue up 1.6%. In the United Kingdom, our system strength drove volume and revenue growth. We grew market share in the off-trade and in the on-trade, our star pubs continued to outperform the broader pub market, while Cruz Campo, Murphy's, Foster's and our premium cider portfolio supported its momentum. In Western Europe, customer partnerships and innovation helped rebuild momentum. France delivered mid-single-digit volume growth as weighted distribution recovered from the retailer dispute last year, with innovation and strong summer activation supporting the growth. Finally, an efficient operating model and cash delivery remained important components to sharpen Europe's value creation model. The setup of multi-market organizations is helping simplify our business, supporting scale and productivity. Strong discipline on cost and cash conversion also supported the region's performance. Now, let's go through the financial highlights, which I keep relatively brief. Starting with net revenue, we delivered 2.6% organic net revenue growth, reaching 14.8 billion in the first half. On the bridge, consolidated volume growth contributed 57 million and price mixed 328 million, resulting in 385 million of organic revenue growth. Consolidation changes added 325 million, mainly reflecting the acquisition of Heineken Costa Rica, partly offset by a 57 million currency translation headwind. Net revenue per hectolitre increased 2.3%, reflecting disciplined revenue management and positive mix. Growth was led by Asia-Pacific and Africa-Middle East, with Europe broadly stable and the Americas flat despite volume pressure, as you just heard. Importantly, growth gained from the markets where we have chosen to focus. Our focus markets delivered over 90% of Heineken's organic net revenue growth, led by Vietnam, Ethiopia, Nigeria, India, Brazil, the UK and France. Moving on to operating profits. We delivered close to 2.2 billion of operating profit. Growing 6.7% organically, with operating profit margin expanding 55 basis points to 14.6%. Organic growth contributed 135 million, consolidation added 46 million, mostly reflecting Heineken Costa Rica and the disposal of the Demographic Republic of Congo, and currency translation was a 38 million headwind. Given the differences across legions, a brief color. Africa and Middle East was an important contributor to the organic profit growth, led by Nigeria and Ethiopia and supported by pricing, revenue management, productivity initiatives and a much improved cost base. Asia Pacific also delivered strong operating profit growth, led by Vietnam with China supporting through license income and share of profit, so not fully reflected here in the operating profit bridge. Drivers with a double-digit volume growth, favourable portfolio mix and productivity actions in key growth markets. In the Americas, profit grew despite softer volumes, with Brazil supported by price mix, improved customer and channel mix, productivity initiatives and supply footprint benefits. Results from Henneken Costa Rica are recorded as consolidation differences. In Europe, savings and cost discipline helped offset a declining category, negative channel mix, as well as higher regulatory costs and competitive investments, mainly in pricing and brand activation. Head office costs were a slight drag on organic profit growth. I would position this as temporary transition-related costs towards a simpler and more scalable organization. Variable costs increased by a low single digit per hectolitre, with gross savings helped to mitigate inflation as we kept pricing below inflation in many markets. Marketing and selling expenses remained at 10.1% of revenue, with stronger resource allocations supporting our brand and marketing priorities, and investments in sponsorship and in-trade execution. Overall, we expanded operating profit margin while continuing to fund growth momentum. Let me turn to other key financial metrics. At the middle of the slide, you see that net profit increased 10.2% organically to €1.256 billion and diluted EPS was €2.29, up €11.6 on a constant currency basis. It reflects the strong operating profit delivery with the operating profit to net profit conversion broadly in line with last year. Share of profit from associates and joint ventures increased 19% organically to 159 million, supported by profit growth from an associate partner in China. Net interest expenses were 287 million on a Bayer basis. The organic development was favorable. The reported line includes consolidation in currency effects. All the net finance expenses improved organically to 76 million, supported by lower losses from currency revaluations on outstanding foreign currencies payables. The effective tax rate was 29.7%, slightly higher than 28.9% last year, as Heineken Costa Rica was integrated in the footprint. Net debt to EBITDA was 2.6 times, slightly above our target of below 2.5 times, mostly reflecting the acquisition of Heineken Costa Rica. And finally, the interim dividend is proposed at 76 cents per share, in line with our dividend policy to pay out 40% of last year's total dividend. Let me now turn to free operating cash flow. We delivered a strong step up in cash generation. With free operating cash flow increasing to almost 1.4 billion compared to 257 million last year. This represents a total improvement of 1.1 billion and a cash conversion ratio of 97%. The improvement was mainly driven by stronger working capital performance and lower capex. Working capital moved from a 405 million outflow last year to a 290 million inflow this year, an increase of around 600 million, driven by better inventory and payable days. CapEx was lower at 1.1 billion, or 7.2% of net revenue, significantly below the 9.9% ratio of last year, driven by improved capital phasing and tighter capital discipline. A rallying cry of growth without capex resonates and helps us think and act differently, with opportunities to unlock additional capacity from existing breweries through research and development, recipe and process improvements as we have seen, for example, in Rwanda and Ethiopia. Costa Rica also contributed to the cash performance with strong cash generation in the first months since acquisition, supported by improved payment terms and disciplined financial management. Overall, our capital productivity focus under Evergreen 2030 is starting to deliver. Stronger working capital management, more disciplined capital deployment for more cash and higher returns on invested capital. We are accelerating our Evergreen 2030 execution. As we mentioned earlier, on our growth priority we are stepping up our innovation efforts through a more agile pilot and scale model. We are brewing the future with Heineken Studio, our consumer-facing innovation center here in Amsterdam, where we can experiment at pace and improve through continuous and direct consumer feedback. In parallel, we expanded the deployment of AI and digital capabilities across the business, including the global rollout of My Freddy AI, an AI-powered platform supporting our commercial teams with global insight while ensuring local relevance. Together, these initiatives enable faster execution, stronger consumer engagement, and will drive sustainable growth. Let me briefly turn how we are building the organization to deliver Evergreen 2030 with more speed, skill and discipline. This is the next phase of our productivity agenda, building the capabilities to invest behind growth, improve efficiency and strengthen execution. And Heineken Business Services is an important proof point. We already have circa 4,000 people in our Heineken Business Services, reflecting both the capabilities we already had built and the roles we have started to move into the network. With centers in Poland, Mexico, Brazil and India, HBS is now becoming a global capability platform, expanding specialist capability across finance, procurement, HR, data analytics and AI. The point is not only lower costs. HBS helps us to standardize processes, connect data, skill automation and robotics, and build digital and AI-enabled ways of working. This should deliver better, faster, and more consistent services, while giving operating companies more focus on growth and commercial execution. The second proof point is in Europe, where we have launched four multi-market organizations. These so-called MMOs allow us to pool resources and capabilities across countries, combining local proximity with greater scale and more efficient execution. These are part of a broader productivity and operating model agenda, and across the group, productivity actions materially advanced in the first half, including a reduction of circa 3,000 FDEs, while we continue to build a simpler, more scalable organization. Through HBS, MMOs and clearer ways of working. Let me now turn to a short reminder on our capital allocation priorities. We invest first behind our organic growth and business expansion, while maintaining strict financial discipline and our long-term net debt to EBITDA target of below 2.5 times. We ended the half at 2.6 times, reflecting of course the acquisition of Heineken Costa Rica, but are on track to be below our target this year. We value a consistent dividend policy and propose an interim dividend of 76 cents per share. We recently updated our payout ratio for the full year to be in between 30 to 50% of net profit. We continue to shape Heineken's advantage footprint. And with Heineken Costa Rica, we materially strengthened our position in Central America, while the DRC disposal gives the opportunity to continue building our brands in that market with an asset-light model. Combined, this is expected to add 2-3% of earnings per share. And finally, we remained in the second year of our 1.5 billion share buyback program, which on a reduced share count should be around 2% accretive to EPS this year. Overall, the framework is unchanged. Invest for growth, protect the balance sheet, maintain a consistent dividend policy, pursue value announcing acquisition, and return excess cash where appropriate. Let me close with the outlook for 2026. We remain confident in the execution of Evergreen 2030, but prudent in our expectations for the remainder of this year. We assume continued macroeconomic and geopolitical uncertainty and an unchanged consumer environment in most of our markets. We continue to invest behind growth and adapt our operating model with speed. Gross savings are expected towards the upper end of our 400-500 million guidance range, helped and will help mitigate parts of the emerging cost pressures related to the middling situation. And as a result, we continue to expect variable costs to rise by a low single digit per hectolitre, broadly in line with previous guidance. We expect the effective tax rate to be around 28% towards the upper end of our previous range of 27 to 28%, reflecting the inclusion of Heineken Costa Rica. And other assumptions are broadly unchanged. All in all, we reiterate our operating profit growth guidance to be in the range of 2 to 6%. Note that based on current spot rates, currency translation is expected to be slightly favorable to operating and net profit. Finally, on EPS, the acquisition of Heineken Costa Rica and the DRC exposure are expected to be 2-3% accretive for full year 26 and the ongoing share buyback adds about 2% to EPS. Together, this reinforces the value of disciplined capital allocation while we continue to invest behind growth and maintain balance sheet discipline. So, to summarize. We delivered quality volume and revenue growth, robust profit delivery and strong cash conversion in the first half. Growth was driven by our global and local power brands in focus markets, while productivity supported margin expansion and returns. You also heard many examples of how we accelerate implementation of Evergreen 2030, including innovation, business services, multi-market organizations and operating model simplification. and we reiterate our full-year operating profit guidance of 2-6% growth. With that, thank you for listening and we're happy to take your questions.