Heineken reported on Monday it had taken an impairment charge of EUR874million on its investment into China Resources, the largest brewery in China.
The move is a direct result of the weakened demand for consumer goods in China that has affected China Resources share price.
Heineken’s first-half financial results have been significantly affected by the impairment.
Heineken made EUR1.1 billion in profit during the first half of last year
Heineken’s first-half 2024 net loss was EUR95m due to an impairment charge, which is a far cry from the EUR1.1b profit reported by the company during the same time period in 2017.
The challenges Heineken faces in China, one of the key areas for its global business operations, are highlighted by this significant change.
The consumer demand and macroeconomic concerns
Heineken attributes the decline in China Resources’ share price as the reason for the necessity to reduce the value of the 40% stake it holds in that company.
Dutch Brewers indicated this could be a reflection of broader worries about China’s macroeconomic climate and the impact it has on consumer spending.
The impairment is caused by external factors rather than issues specific to the company.
Beer growth falls short of expectations
Heineken has reported that despite the impairment of assets and the net loss during the first half of the year, the beer volume sold by the company increased organically by 2,1%.
This growth was below the analysts’ forecast of 3.4%, due primarily to bad weather in Europe.
The shortfall in revenue highlights the challenges and complexities of working on diverse markets around the world.
The recent Heineken financial results, and its substantial impairment charges on Chinese investments highlight the continued volatility and unpredictability in the international market.
The company will have to adjust its strategy to align better with changing economic conditions and patterns of consumer behavior.
As new information becomes available, this post Heineken’s EUR874M impairment on Chinese investments triggers EUR95M net loss in H1 could be updated.
