Heineken (HEINY, HKHHF) is arguably one of the best stocks in the world. Its products are sold in almost every country and its sales and earnings have been going up year after year. The stock is expensive and probably not a buy at this point, but should be on your radar.
There are 572.3 million shares of Heineken and the company trades at a market cap of 46.1 billion euros ($51.63 billion). There are 288 million shares of Holdings and it trades at a market cap of 21 billion euros ($23.6 billion). Earnings per share were 3.31 euros in 2015. Heineken trades at a price to earnings ratio of 24.3 and Holdings 22.12. A dividend of 1.30 euros per share was paid in 2015. This equates to a dividend yield of 1.6% for Heineken and 1.775% for Holdings. Holdings owns 50.0005% of Heineken and the Heineken family owns a controlling share of Holdings. It takes $1.12 to buy one euro.
The company made 20.511 billion euros ($22.97 billion) in sales, up from 19.256 billion euros ($21.56 billion) in 2014. Beer volume was 497.4 million gallons, up from 478.9 million in 2014. Operating profit was 3.381 billion euros ($3.79 billion) in 2015, up considerably from 2.456 billion euros ($2.75 billion) in 2014.
Brands include: Amstel, Strongbow Cider, Sol, Dos Equis, Tecate, Tiger, Bintang, Lagunitas, and Bierra Moretti. They are many more brands, but they would be unfamiliar to the American investor/consumer. What is interesting is the number of Mexican beers. These were acquired from Femsa a number of years ago. Africa/Middle East/Eastern Europe contributes 15.4% of sales, Americas 24.4%, Asia Pacific 11.8% and Europe 48.4%. Definitely a global company. Dutch airline KLM is now serving the beer on tap on its airlines.
Heineken’s debt is BBB rated by S&P. Free cash flow was 1.692 billion euros in 2015. The balance sheet showed 824 million euros in cash and 2.87 billion euros in accounts receivable. The liability side showed 1.4 billion euros in debt, 6 billion euros in accounts payable, and 10.658 billion euros in long term debt. Like many food and beverage companies, Heineken carries quite a bit of debt, but its free cash flow is pretty stable.
This year, Heineken took a hit in Nigeria as the naira was unpegged from the U.S. dollar. The naira fell 40%. First half profits fell 14% in the African region. There was also a 233 million euros ($261 million) write-down in Congo. First half sales grew 2% and profit was up 11.2%. Both were less than expectations.
Basically Heineken is the perfect company. It increases sales, earnings per share, Ebtida and every other metric over time. It has enough debt to grow through M&A, but not too much. Heineken is almost literally in every country on the planet. It is affected by wars, currencies and many other global events. The marketing team is top notch. The brands are seen everywhere: from soccer matches to prime time television. There will be a Heineken House at the 2016 Olympics in Rio. I like the sound of that.
I do not think the big merger between Inbev (BUD, Financial) and SABMiller (LSE:SAB, Financial) will affect Heineken too much. Its brands are well established and have their own following. The two large brewers could be affected by microbrews, but both keep buying out the small brewers and create their own. It’s difficult to even tell who owns what. If you are at a bar and see Goose Island and Lagunitas, you probably do not realize that the two are owned by Inbev and Heineken (respectively listed).
We own Holdings and I would advise the same for you. It trades at a discount to Heineken, so you are getting a higher dividend. I do not think the family will ever sell out. We bought a few years ago on bad news on Europe, but are not buying now. The shares are way too expensive. It is the type of stock I want to hold onto for a long time and watch it go up. No doubt Heineken would be affected by global events, as people will drink less premium beers. Still, the company has weathered Nazis parachuting into Holland and many other global events.
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