Heineken (HEINA; A3/BBB+) 1H (to June) Results

It's taken an impairment charge on its 21% Stake in China Resources Beer driven by CR's stock price slide but little impact for credit - recent earnings look fine, CR is low levered and royalties from it are up. Outside that Heineken's earnings look fine; volumes were up over 1H but weaker in 2Q and FY EBIT guidance is a firm +4-8%. Equities are always noisy/volatile; cash has followed it +1-3 wider but is coming out of tight levels. It only shows some value in long-end; but AB-InBev gives it company out there and runs much better fundamentals (~2x size, +10% higher & sector leading EBIT margins). Reminder we expect 2-3 tranche Carlsberg supply when/if Britvic deal closes as it refi's out bridge loans.

• 1H revenue at €14.8 (organic +5.9%, +2.2% reported). EBIT was €1.5b (+12.5%, reported -4.3%) at a 8.7% (or adj. 14%) margin.
• 1H volumes were +1.7% while pricing was +4.9% - latter driven by EMEA. Hefty FX impact of €625/-4.3% which it says was mainly on the -48% Naira move.
• EBIT captures a €874m non-cash impairment charge on its 21% stake in China Resources Beer {291 HK Equity} - FV of €2.1b). Value is tied to the share px whose moves (1yr; -50%) it says is not reflecting fundamentals. It's noted royalties - on the back of higher revenues - has increased and now makes up 7% of adj. EPS.
• Trends were weaker in 2Q; revenue organically grew +3.4% with slight volume falls across the board. It's saying poor weather in Europe was a contributor.
• Premium beer growth at +5.1% and low & no-alcohol at HSD growth both outperformed. It saw double digit growth of latter in UK and its flagging its non-alcoholic beer as the driver. It's not juices & soft drinks but still some positive read-through to Carlsberg that is expanding into non-alcoholics with Britvic acquisition.
• FOCF was €655, interim dividend of €0.69/share (~€400m). It is gross/net 2.8x/2.4x levered on LTM EBITDA; within it's stated net <2.5x target.
• FY24 guidance is for EBIT of +4-8% (prev. "low to high single digit", c+6%).

Equity Takes here.