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Summary
- Heineken NV has announced to cut as much as 8,000 jobs as a part of organisation redesign.
- Due to the Covid-induced backlash and sluggish demand across the globe, Heineken had reported a major dip in the profitability.
- The timeliness of restructuring is likely to vary, subject to the specific circumstances of each of the local operations.
Amsterdam-based brewing major Heineken NV (AMS: HEIA) on Wednesday announced to cut at least 8,000 jobs as a part of organisation redesign after its net profits slumped by 50 per cent year-on-year due to the Covid-induced backlash and sluggish demand across the globe.
According to the financials disclosed by Heineken, FY20 net profit plunged 49.4 per cent to €1,154 million with the consolidated beer volume sliding by 8.1 per cent, organically.
Under the overall restructuring, Heineken has conducted a review of the effectiveness and efficacy of its regional offices, including each of the local operations and its organisations at head office.
Organisation redesigning
Under the proposed organisation redesign, Heineken will cut down the overall employee count by nearly 8,000 people. Heineken will earmark a sum of around €420 million as the total charge of restructuring. However, the timeliness of restructuring is likely to vary, subject to the specific circumstances of each of the local operations of the company, Heineken said in Euronext Amsterdam filing.
By the end of Q1 FY2021, Heineken is going to reduce the cost of personnel at the head office by nearly 20 per cent as the overall measures taken by the UK government due to COVID-19 pandemic continue to have a material impact on markets and business.
FY20 financials
The net revenue of Heineken before exceptional items and amortisation (beia) decreased by 11.9 per cent with the operating profit (beia) falling by 35.6 per cent. Heineken realised a drop of a 9.8 per cent in total consolidated volume and a 2.4 per cent dip in net revenue per hectolitre on the back of country mix effects and non-volume related revenue decline.
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As per the Heineken filing, the underlying price mix of the company on a constant geographic basis remained broadly flat for the full fiscal year. The premium beer volume for Heineken outperformed the broader portfolio in the majority of the markets, the company said. The termination of on-trade, especially in Europe, in the October-December period and the aftereffects of renewed restrictions across all regions are reflected in the Q4 FY2021.
Guidance
The year 2021 has not been quite good for Heineken as restrictions across the European markets, including the on-trade closures and cross-border travel restrictions impacted the operations. According to an estimate by Heineken, less than 30 per cent of the on-trade outlets were operating at the end of January 2021, particularly in Europe.
As far as the European trade is concerned, the product and channel mix are likely to adversely impact the upcoming results, Heineken stated.
Shares
Following the earnings release, Heineken share price fell more than 3 per cent in the intraday trade. According to the latest data available with the Euronext Amsterdam, the stock of Heineken slipped 3.32 per cent to a weekly-low of EUR 86.08 from the previous close of EUR 89.04 apiece. As the trading progressed, the stock partly recouped the losses. At around 1352 GMT+1, shares of Heineken were trading at 86.66, down 2.67 per cent.
