Report of the Executive Board
Financial review
Raw materials, consumables and services expenses increased by 10.8 per cent, which were mainly
caused by higher packaging material, marketing and selling and energy expenses. Marketing and
selling expenses increased organically by 9.2 per cent and remained stable at 12.6 per cent of revenue
and reflects our continuous marketing investments efforts in various markets in 2006. Next to the
volume increase, the introduction of the clear plastic label was the main cause for the rise in packaging
material expenses, whilst the increase in oil and gas prices was the main cause for the rise in energy
and water expenses by 22.9 per cent.
Personnel expenses increased by 2.8 per cent, including €79 million exceptional restructuring charges.
As such, total expenses increased less than revenue and rose by 8.3 per cent to €10,403 million.
The effect of movements in exchange rates had an insignificant impact on total operating expenses
of 0.3 per cent or €35 million.
EBIT and profit attributable to equity holders of the Company (net profit)
millions of EUR EBIT Net profit
2005 1,283 761
Organic growth 149 106
Changes in consolidation 9 (15)
Effects of movements in exchange rates 19 (1)
Exceptional items and amortisation of brands372360
200 61,832 1,211
EBIT and net profit
In 2006 EBIT amounts to €1,832 million compared to €1,283 million in 2005, heavily impacted by
exceptionals of which the sale of the land and brewery in Seville, Spain and related expenses were
important contributors. 2006 EBIT beia of €1,569 million compared to the 2005 EBIT beia of €1,392
million represents an organic growth of €10.7 per cent.
EBIT as a proportion of revenue increased to 15.5 per cent from 11.9 per cent.
The positive €19 million impact of movements in exchange rates is considerably higher than previous
years, due to the stable US Dollar compared to 2005 and our hedging policy.
The effective tax rate decreased from 26.6 per cent to 22.0 per cent in 2006, mainly due to sale of real
estate in Spain, which is taxed at a lower tax rate due to re-investment facilities and recognition of
previously recognized deferred tax assets as a result of finalisation of local tax rulings in 2006. Without
these exceptional tax gains, the tax burden would have been 27.3 per cent compared to 26.6 per cent
in 2005.
Basic earnings per share increased from €1.55 to €2.47 as a result of higher net profit.
CO Heineken N.V.
Annual Report 2006
