Heineken Welcomes Trump-EU Trade Agreement After Stocks Drop

UNSPLASH/Stella de Smit ILLUSTRATION

JAKARTA - Dutch beer producer Heineken welcomes the trade agreement between the European Union and the United States commanded by President Donald Trump. Heineken is now considering all options to face increasingly biggest tariff challenges in the long term, including manufacturing diversion.

The world's number two beer producer stock fell 6.5% despite reporting a 7.4% increase in first-half profit that exceeded expectations.

Profit growth occurred thanks to growth in previously difficult areas such as Africa and Asia as well as cost savings.

Analysts and investors refer to Heineken's warning that the volume will be lower than expected by the end of the year as US policies, particularly in the trade sector, disrupt the American market.

The company exports beer, especially lagers that become the company's name, to the US from Europe and Mexico, and has also experienced an indirect impact on consumer confidence in key markets such as Brazil.

Dolf van den Brink's CEO welcomes the assurance brought by the trade deal reached on Sunday, reducing the US tariff threat by 30% for EU goods to 15% - a rate that will still affect Heineken's profits in the US.

"All options are being considered to mitigate long-term rates, including diverting manufacturing," he said.

But these steps are explained by CEO Heineken requiring large capital including better policy consistency.

"We are considering all options, starting from continuing our current setup, a more hybrid version, or vice versa," he said.

"If and when we consider it more financially attractive in the medium to long term, we will definitely explore it," he continued.

Currently Heineken is still facing US tariffs of up to 30% over products manufactured in Mexico, unless the Mexican government can reach an agreement with Washington before August 1 deadline.

The executives told reporters that since the first quarter, Heineken has also experienced economic uncertainty that has an impact on spending and trust in the US, Brazil, and Mexico.

In Mexico, remittances from the US have fallen significantly, which has an impact on the sale of the beer industry. US Hispanic consumers have also reduced spending.

Heineken continues to estimate annual profit growth between 4% and 8%.

The company also surpassed its second-quarter revenue and volume projections, with growth in markets such as Vietnam and India, as well as increasing its annual cost-saving target by a quarter to 500 million euros ($586 million).

"They have reduced their volume projections a little bit considering everything that's happening in the world. For me, it's not a bad result," said Ryann Dean, global analyst at Aylett Fund Managers, investor Heineken.

Heineken's strong growth in markets like India and China, as well as consistent profitability, is more than sufficient to keep up with this.

According to Dean, the developing country's market will boost Heineken's long-term volume growth.