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Heineken Releases Annual Report

- By Holmes Osborne, CFA

Heineken (HEINY) (HKHHY) is arguably one of the strongest brand names in the world. With all of the consolidation of brewers, Heineken is left as the second-largest beer maker in the world. It has increased revenues and earnings year after year and is very profitable.

There are 570 million shares, the stock trades at 77.71 euros ($82.05) and the market cap is 44.3 billion euros ($47 billion). Earnings per share are 3.68 euros and the price-earnings ratio is 21.1. The dividend is 1.34 euros and the dividend yield is 1.72%. It takes $1.06 to buy one euro.


Revenues increased 20.792 billion euros from 20.511 billion euros in the prior year. Operating profit grew to 3.54 billion euros from 3.381 billion euros. The operating profit percentage increased by 50 basis points to 17%. Net income increased slightly to 2.098 billion euros from 2.048 billion euros. Earnings per share increased from 3.57 euros to 3.68 euros. The dividend was increased from 1.30 euros to 1.34 euros. There was a share buyback and shares outstanding decreased by 40 basis points.

Free cash flow is 2.963 billion euros. The free cash flow yield would be 6.7%. Cash on the balance sheet is 3 billion euros and accounts receivables is 3 billion euros. Accounts payable are 6.2 billion euros and debt is 14.6 billion euros. It seems liabilities are getting a little high in my opinion. The debt is BBB+ rated by S&P.

Fifteen percent of revenues are derived in Africa, the Middle East and Eastern Europe (do not ask me why they lump those three regions into one), 24.3% in the Americas, 13.5% in Asia Pacific and 47.2% Europe. Quite a few mergers and acquisitions took place last year. Deals took place in Jamaica, Slovenia, South Africa, the Phillipines and Malaysia. It also bought Kirin's Brazilian division for $1.1 billion and purchased Punch Taverns in the U.K.

Heineken's better-known brands include Amstel, Dos Equis, Sol, Tecate, Tiger, Bintang, Birra Morretti and Red Stripe. The company is making a push into cider with Strong Bow, Bulmers and Orchard Thieves.

We have owned the stock for almost five years. With the dividend, we are up almost 90%. We own Heineken Holding. Holding trades at 70.71 euros a share, there are 288 million shares and the market cap is 20.364 billion euros. Holding owns 50.005% of Heineken. Holding's shares of Heineken are worth 22.17 billion euros, so it trades at a discount of 8.1%. It pays the same 1.34 euros dividend, but since the stock trades at a lower level, the yield is higher at 1.9%. Holding is 51.7% owned by the Heineken family. Femsa also owns 14.9%. This is where the large portfolio of Mexican beers comes from.

I love this stock. I am tempted to buy more as I have not in the last five years. It is family controlled and they are not selling. They stick to one thing and do it well--beer. They have a clear band and spend a fortune on advertising to bolster it. The company is run for shareholders with buybacks and a nice dividend. If the stock fell back down into the 60s, I might buy some more.

Disclosure: We own shares.

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This article first appeared on GuruFocus.