Morning Note: Market news and an update from Heineken.

Market News

Bond yields climbed to 4.55% for the 10-year Treasury after Federal Reserve Chair Jerome Powell signalled patience before cutting interest rates further and as investors look ahead to the upcoming US CPI data. The core figure for January is expected to come in at 3.1%. The Fed’s John Williams said it will “take time” before the central bank achieves its 2% inflation goal on a sustained basis. Gold drifted below $2,900 an ounce.

US equities were mixed last night: S&P 500 (+0.1%); Nasdaq (-0.4%). In Asia this morning, equities were firm: Nikkei 225 (+0.4%); Hang Seng (+2.6%); Shanghai Composite (+0.9%). The yen is on track for its longest losing streak in more than a month. The FTSE 100 is currently little changed at 8,778, while 10-year Gilt yields moved up to 4.51%. Sterling trades at $1.2450 and €1.1995.

American crude inventories rose by 9m barrels last week, the API is said to have reported. That would be the biggest increase in a year if confirmed by the EIA today. On the global front, the EIA expects oil surpluses to reach 1m barrels a day in 2026, driven by increased non-OPEC and US production, up from the 800,000 barrels it projected last month. Brent Crude currently trades at $76 a barrel.

President Trump directed agencies to work with Elon Musk’s DOGE to slash their workforces. His advisers are discussing plans to fold the FDIC into the Treasury Department to try to consolidate bank regulators, the WSJ reported. Meanwhile, Ford CEO will warn Congress that 25% tariffs on Canada and Mexico would “blow a hole” in the US auto industry. The tariffs would add $60bn in costs to the sector, likely leading to a $3,000 increase in new-vehicle prices.

Source: Bloomberg

Company News

Heineken has released its 2024 results which came in slightly above the guidance range. The group has released guidance for 2025 – operating profit growth of 4%-8% – in line with what the market expected. The company has also raised its dividend by 7.5% and, in light of its strong financial position, has launched a €1.5bn share repurchase programme. Ahead of this afternoon’s analysts’ meeting, the shares are trading 12% higher.

Heineken is the world’s second largest brewer, generating net revenue of €30bn from a portfolio of iconic brands, many of which have been quenching the thirst of consumers for decades. In addition to the core Heineken brand, the company owns several well-known beers and ciders, including Sol, Tiger, Amstel, and Strongbow, as well as 300 or so local brews. The company also owns around 3,000 pubs in the UK, runs a wholesaling operation in Europe, and has a strong global distribution capability. Over time, the group has expanded and developed its global footprint through investment in new breweries, partnerships, and acquisitions. It has also exited several businesses to refine the portfolio, with disposals in Sri Lanka, Nigeria, South Africa, and Slovakia.

We believe the company is well placed to benefit from long-term growth opportunities in emerging markets (which generate more than 50% of revenue), where young and growing populations, low per-capita beer consumption, and increased wealth are expected to drive growth. The company believes the biggest opportunity is in India, with strong prospects also seen in Mexico, Brazil, China, Vietnam, and South Africa.

The group generates more than 40% of its revenue from premium brands, where volume is growing twice as fast as mainstream beer because consumers turn to better brands as they grow older and wealthier. Finally, the group is benefiting from the growth of low and no-alcohol products and increased digital revenue.

We believe the shareholding structure, supported by family ownership, ensures the company is run for the long term and in the best interests of all shareholders.

Over the medium term, the group has faced a challenging macro environment with multiple headwinds including Covid-19, higher input costs, and specific country challenges.

In 2024, net revenue grew by 5.0% on an organic basis to €30.0bn, slightly better than market expectations. Growth was driven by a 3.5% increase in net revenue per hectolitre as pricing was used to mitigate inflationary pressure. Total consolidated volume rose by 1.4%, while the underlying price-mix was up 4.1%.

In Q4, net revenue grew by 4.7%, above the market forecast. This was driven by 3.1% growth in net revenue per hectolitre. Total consolidated volume improved by 1.5%, an improvement on the 0.7% in the third quarter.

Beer volume rose by 1.6% in organic terms in the full year, with the company gaining or holding volume market share in more than half of its markets. Growth was spearheaded by the leading brands in the largest markets, including Amstel in Brazil, Cruzcampo in the UK, and Kingfisher in India. In Q4, beer volume grew by 1.8%.

Notably, beer volume expanded in all four regions during the year, across both developed and emerging markets: Europe (+0.3%); Asia Pacific (+4.4%); Africa, Middle East and Eastern Europe (+3.1%); and The Americas (+0.8%). Europe had a difficult final quarter (-1.8%), held back by the impact of the flooding in Spain.

The group continues to benefit from an ongoing shift towards product premiumisation, with volume up 5.2% organically, led by the Heineken brand itself, which grew volume by 8.8% in the year. In the low & no-alcohol category, the company consolidated its market leadership, volume grew by high-single digits and Heineken 0.0 up 10%. The beyond beer segment grew by 4%, led by Desperados globally and Savanna cider in Southern Africa. The group’s e-commerce platforms continued to grow, with gross merchandise value captured via B2B digital platforms up to almost €13bn.

The productivity programme delivered €0.6bn of gross savings in 2024, above the €0.5bn target. This enabled the company to invest in growth and in building strong brands – marketing and selling spend rose by €0.3bn, a 10.7% organic increase. Investment has been concentrated on the largest markets with the biggest opportunities including Brazil, Mexico, South Africa, Nigeria, Vietnam, and India.

Adjusted operating profit grew by 8.3% to €3.5bn, a touch above the guidance for growth of 4%-8%, and market expectations of 5%. Improved portfolio mix, pricing, and productivity savings more than offset inflationary pressures in the cost base. The margin rose from 14.7% to 15.1%.

Heineken has a strong balance sheet. At the end of 2024, financial gearing was 2.2x net debt to EBITDA, versus the long-term target to be below 2.5x. The dividend policy is to pay a ratio of 30% to 40% of full-year net profit, with the 2024 payment up 7.5% to €1.86 (2.5% yield).

The priority for capital allocation remains organic investment, the dividend, and bolt-on M&A. However, in 2024, the company achieved significant deleveraging, supported by strong free operating cash flow exceeding €3bn. Consequently, the company is well positioned to return additional capital to shareholders and has today launched a two-year €1.5bn share buyback programme, a move that will be supportive for the share price.

Guidance for 2025 has been initiated – 4% to 8% operating profit organic growth – in line with the current market forecast and a reflection of the current macro-economic and geopolitical uncertainty. Growth will be supported by productivity gains of at least €400m. The group expects to generate continued volume and revenue growth. However, the first quarter will face a high comparison base and be impacted by technical factors such as fewer selling days and the timing of Easter and Tết.

Source: Bloomberg