Notes to the Consolidated Financial Statements (continued)
31. Off-balance sheet commitments (continued)
Report of the
Report of the
Annual Report 2016
HEINEKEN leases buildings, cars and equipment in the ordinary course of business.
Raw material contracts include long-term purchase contracts with suppliers in which prices are fixed or will be agreed based upon predefined price
formulas. These contracts mainly relate to malt, bottles and cans. The raw materials purchase commitments relates to purchase contracts with
EMPAQUE which has become a third party supplier after the disposal in 2015.
During the year ended 31 December 2016, EUR 302 million (2015: EUR 301 million) was recognised as an expense in profit or loss in respect
of operating leases and rent.
On 15 December 2016 HEINEKEN has announced that following Vine Acquisitions Limited's announcement of a recommended cash offer for Punch
Taverns plc, HEINEKEN through HEINEKEN UK has agreed a back-to-back deal with Vine Acquisitions to acquire Punch Securitisation A ('Punch A'),
comprising approximately 1,900 pubs across the UK. HEINEKEN will pay an aggregate consideration of GBP305.0 million (EUR 356 million as per
31 December 2016) for the shares in Punch A and assume intercompany debts due from Punch A to Punch Taverns plc. As at 20 August 2016
external debts (nominal value) and derivatives of Punch A amounted to GBP 962.3 million. On 1 November 2016, Punch Taverns plc reduced the
Punch A external debt by redeeming GBP 65 million of its class B4 notes. The acquisition of Punch A is subject, amongst other things, to approval
by the relevant regulatory authorities.
The EUR 356 million cash consideration is included in the other off-balance sheet commitments (less than 1 year).
Next to the above mentioned consideration for Punch A, other off-balance sheet obligations includes distribution and service contracts.
Committed bank facilities are credit facilities on which a commitment fee is paid as compensation for the bank's requirement to reserve capital.
The bank is legally obliged to provide the facility under the terms and conditions of the agreement.
HEINEKEN has contingencies for which, in the opinion of management and its legal counsel, the risk of loss is possible but not probable and
therefore no provisions have been recorded. For example, HEINEKEN is from time to time involved in legal and arbitration proceedings arising in
the ordinary course of business. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings,
negotiations between affected parties and governmental actions. HEINEKEN cannot reliably estimate the likely timing and amount of resolution
for the majority of these matters.
Furthermore, HEINEKEN operates in a high number of tax jurisdictions, and is subject to a wide variety of taxes per tax jurisdiction (for example excise
duties, VAT, corporate income tax and local taxes). In some cases, tax legislation is highly complex and subject to interpretation. As a result, HEINEKEN
is required to exercise judgement in the recognition of the probable amount of taxes payable or recoverable and determination of contingencies.
HEINEKEN's significant contingencies are described below.
As part of the acquisition of the beer operations of FEMSA in 2010, HEINEKEN inherited existing legal proceedings with labour unions, tax
authorities and other parties of its, now wholly-owned, subsidiaries Cervejarias Kaiser Brasil and Cervejarias Kaiser Nordeste (jointly, Heineken
Brasil). The proceedings have arisen in the ordinary course of business and are common to the current economic and legal environment of Brazil.
The proceedings have partly been provided for (refer to note 28). The contingent amount being claimed against Heineken Brasil resulting from such
proceedings as at 31 December 2016 is EUR 348 million. Such contingencies were classified by legal counsel as less than probable of being settled
against Heineken Brasil, but more than remote. However, HEINEKEN believes that the ultimate resolution of such legal proceedings will not have a
material adverse effect on its consolidated financial position or result of operations. HEINEKEN does not expect any significant liability to arise from
these contingencies. A part of the aforementioned contingencies (EUR 269 million) is tax-related and qualifies for indemnification by FEMSA.
As is customary in Brazil, Heineken Brasil has been requested by the tax authorities to collateralise tax contingencies currently in litigation amounting
to EUR 521 million by either pledging fixed assets or entering into available lines of credit which cover such contingencies.
Less than More than
In millions of EUR Total 2016 1 year 1-5 years 5 years Total 2015
Guarantees to banks for loans (to third parties)
Guarantees to banks for loans relate to loans and advanced discounts to customers, which are given to external parties in the ordinary course
of business of HEINEKEN. HEINEKEN provides guarantees to the banks to cover the risk related to these loans.