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August 27, 2009

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Heineken brews up 20% in net earnings

DUTCH brewer Heineken NV reported yesterday a 20 percent increase in net profit for the first half of 2009 after booking a one-time gain on the repurchase of distressed debt at one of its subsidiaries.

Analysts said the results were better than expected for a seller of premium beer during a time of economic malaise.

Net profit was 489 million euros (US$700 million), versus 407 million euros in the same period a year earlier. Heineken booked one-time gains of 84 million euros this year after repurchasing debt at the pub-managing arm of Scottish & Newcastle, which Heineken bought for 14.3 billion euros in May 2008.

Sales rose 11 percent to 7.15 billion euros, boosted by the Scottish & Newcastle buy, which made Heineken the largest brewer in Britain.

The company said comparing the same operations in both years, sales would have fallen 0.4 percent. Sales volumes dropped 5.6 percent amid the economic downturn but the company successfully hiked prices.

"The strength of our brand portfolio has enabled us to support our margins, achieving a stable top line performance despite lower volumes," said Chief Executive Jean-Francois van Boxmeer in a statement.

"In difficult economical times, Heineken has delivered a relatively good performance and clearly ahead of consensus expectations," said analyst Kris Kippers of Petercam Bank in a note on the earnings.

"Compared to our estimates, the numbers were clearly better in Africa and certainly the US."

However, Kippers said shares appear fairly valued at current levels and repeated a "Hold" recommendation.

He said raising prices to keep up sales is a strategy that may have run its course.

"Going forward, this will become increasingly difficult as the effect of past price increases will fade and the price gap with non-premium beers should certainly not widen," Kippers said.


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