major provisions were made in regard to
integration plans in France and Italy, and
reorganization programmes elsewhere in Europe.
In 1997, the poor situation in the Swiss real estate
market required additional depreciation.
Provisions were also made for costs relating to
the introduction of the Euro and for adjustments
needed to software for the year 2000 factor.
Operating profit and net profit
The operating profit based on replacement value
increased by 19% to NLG 1,203 million. The
increase in marketing and selling expenditure
was exceeded by the benefits of an improved
sales-mix, higher selling prices, synergetic effects
in France and Italy, and lower purchasing prices
for raw materials and packaging materials.
Changes in exchange rates also exerted a positive
net influence on the operating profit. The new
consolidations made a limited contribution to the
increase in the operating profit which rose from
8.3 of net turnover to 8.9%, and was 10.7% of
total capital employed compared with 9.5 in 1996.
The earnings of non-consolidated participations
were lower than in 1996 when there was a non
recurring book profit on the sale of a minority
participation. Stripped of this non-recurring item
the result in 1997 was higher. This was due to a
higher result in Poland. In addition, the
participation in Nigerian Breweries Ltd. (NBL)
was increased to 30% so that as from 1997 the
Heineken interest in the net result of NBL is
reported rather than the usually lower dividend
received.
Interest charges were at the same level as in
1996. Lower interest rates and financing charges
for new acquisitions were offset by proceeds from
the higher level of short term invested cash.
The interest cover ratio improved from 40.9 times
in 1996 to 46.9 times.
The tax burden rate rose from 37.4% of the
operating profit in 1996 to 38.8% over 1997.
This increase was due to higher profit before tax
in countries with relatively high tax rates, an
increase in corporate tax rates in a few countries,
Investments and
depreciation
tangible fixed assets
in millions of guilders
900
817
757
700
600
500
400 -
300
Cash flow from
operating activities
in relation to
investing activities
in millions of guilders
2,000
1,600 t-.
1,400
1,000
800
600 -J
400
- 968
1.659
Group funds
as percentage of total
capital employed
60%
55"
50?
45%-
40%
357
30%
25%
20%
15%-
10%
5%
49%
1997
1996
'995
1994
'993
'997
1996
'995
1994
'993
'997
'1996
'995
1994
'993
I Depreciation
Investments
Total investing activities
I Cash flow from
operating activities
HEINEKEN
REPORT OF
EXECUTIVE
19 9 7
THE
BOARD
39
