Outlook 2014
Contents
Overview
Report of the
Executive Board
Report of the
Supervisory Board
Financial
statements
Other information
In 2014, HEINEKEN expects a gradual recovery in the
global economy to underpin improved trading conditions
in several of its key markets. This, together with a continued
focus on effectively executing against our strategic priorities
- Drive Heineken® brand outperformance in the premium
segment, invest in brands and innovation for growth,
leverage global scale to drive cost efficiencies, capture
opportunities in developing markets, drive personal
leadership and further embed sustainability across the
business - is expected to drive an improved business
performance in 2014, and support sustainable revenue
and profit growth.
Improved revenue growth
HEINEKEN expects volume growth in developing markets in
Africa Middle East, Asia Pacific and Latin America and lower
consumption in Europe. This is expected to lead to an improved
organic volume performance trend versus 2013. In addition,
revenue management initiatives are again expected to drive
higher revenue per hectolitre, albeit at a more modest level
compared with 2013. Overall, this is expected to result in organic
revenue growth in 2014. Emerging markets currencies remain
volatile however, and based on current spot rates, this is expected
to have an adverse impact on reported revenues.
HEINEKEN plans a slight increase in marketing selling
(beia) spend as a percentage of revenue in 2014 (2013:12.6%).
This primarily reflects higher planned commercial investments
in Europe, where HEINEKEN is focused on further premium
brand development, ongoing innovation and driving excellence
in sales execution.
Driving margin expansion
HEINEKEN is committed to delivering a gradual and sustainable
improvement in operating profit (beia) margin in the medium
term. This will be supported by continued tight cost management,
effective revenue management and the anticipated faster
growth of higher margin developing markets.
HEINEKEN expects to realise its targeted TCM2 savings of
€625 million covering 2012-2014 during the year. An intensified
focus on driving cost efficiencies is expected to result in new
restructuring opportunities across the Company. In particular,
HEINEKEN plans to further leverage the Global Business Services
organisation to accelerate efficiency benefits in Europe by
expanding the scope of activities within the HEINEKEN Global
Shared Services centre.
As a result of ongoing productivity initiatives, HEINEKEN expects
an organic decline in the total number of employees in 2014.
HEINEKEN expects input cost prices to be stable to slightly lower
in 2014 (excluding a foreign currency transactional effect).
Foreign currency movements
Exchange rate movements will adversely impact revenues and
profits in 2014. Assuming spot rates as of 10 February 2014, the
calculated negative currency translational impact on consolidated
operating profit (beia) will be approximately €115 million. At net
profit (beia), this effect will be around €75 million.
Improving financial flexibility
HEINEKEN will maintain its focus on cash flow generation and
disciplined working capital management. The Company remains
committed to achieving its long-term target net debt/EBITDA
(beia) ratio of below 2.5 by the end of 2014. In 2014, capital
expenditure related to property, plant and eguipment is
forecasted to be approximately €1.5 billion (2013: €1.4 billion).
This increase primarily reflects investments in additional brewing
capacity and commercial assets to support the anticipated
growth in developing markets. Conseguently, HEINEKEN expects
acash conversion ratioof below 100% in 2014 (2013: 84%).
Interest rate
HEINEKEN forecasts an average interest rate of around
4.1% (2013: 4.4%), reflecting lower average coupons on
outstanding bonds.
Effective tax rate
HEINEKEN expects the effective tax rate (beia) for 2014 to be in
the range of 28% to 30% (2013: 28.7%), broadly in line with 2013.
Heineken N.V. Annual Report 2013
5