Heineken NV, the world's third-largest brewer, reported stronger than expected third-quarter group revenue on Wednesday, boosted by U.S. and emerging market strength and price hikes, but investors focused on weakness in Europe.
Europe's largest brewer, whose Heineken brand is the continent's number one selling beer, said the main causes were a double-digit percentage decline in Portugal, which entered its deepest recession since the 1970s this year, and the withdrawal of a product from Finland.
While most other regions saw an increase in volumes and revenues, western Europe, which provided just under half of the Dutch brewer's revenue last year, continues to suffer declining demand. Group sales there fell 2.1 percent in the third quarter.
Heineken, which also makes Amstel beer and Strongbow cider, said consumer caution also led to low single-digit sales declines in Britain, the Netherlands and Spain, although beer volumes rose in France and Italy.
Heineken shares have steadily risen after it won a battle to take full control of Tiger beer maker Asia Pacific Breweries (APB) last month.
However, they were down 2.6 percent at 46.42 euros at 1110 GMT, making them among the weakest in the FTSEurofirst 300 index of leading European stocks. The STOXX European food and beverage index was 0.5 percent higher.
Analysts said they had expected western European volumes to be largely unchanged year-on-year, with drinking spurred by warmer, drier weather in August and September.
"Even though it is compensated elsewhere, the market seems fixated on western Europe," said Andrew Holland, beverage analyst at Societe Generale. "They have expanded into developing markets, but western Europe is still a significant part of their business and it's a drag."
EMERGING MARKET EXPANSION
Heineken's presence in Europe was boosted by its 2008 carve-up with Carlsberg of British brewer Scottish & Newcastle.
However, since then it has been gradually increasing its exposure to developing countries, including the 2010 purchase of the brewing assets of Mexico's FEMSA and its move this year to take full control of APB.
Heineken said group beer volume rose by 4.4 percent in the Americas, with stronger sales in Brazil, Mexico and the United States of brands including Dos Equis, Tecate and Kaiser.
In the Asia-Pacific region, group volumes were up 4.8 percent, with heavier drinking in Indonesia, Singapore, Thailand and Vietnam and a high single-digit percentage expansion in India, where it has a joint venture with United Breweries , the maker of Kingfisher lager.
Overall, consolidated beer volumes rose 2.2 percent on a like-for-like basis, broadly in line with expectations.
Revenue rose 4 percent to 4.97 billion euros ($6.44 billion). The average forecast in a Reuters poll of nine analysts was 4.93 billion.
The company said its operating profit before one-offs was up by a mid single-digit percentage and its net profit was 577 million euros from 525 million a year earlier.
Heineken maintained its forecast that 2012 net profit would be similar to that of last year on a like-for-like basis, with subdued demand in Europe, growth elsewhere and higher packaging costs.
The world's second-largest brewer SABMiller, with some 70 percent of earnings in emerging markets, notably Africa and Latin America, last week reported a 4 percent rise in first-half beer volumes.
World number one Anheuser-Busch InBev reports third-quarter earnings on Oct 31 and fourth-ranked brewer Carlsberg on Nov 7.
