BRUSSELS (Reuters) – Heineken NV (HEIN.AS) on Monday missed estimates for first-half profits, as higher packaging costs offset increased beer sales, but the world’s second-largest brewer stuck with its full-year profit growth forecast.

FILE PHOTO: Heineken beers are seen on a production line at the Heineken brewery in Jacarei, Brazil June 12, 2018. REUTERS/Paulo Whitaker/File Photo

The Dutch maker of Heineken, Europe’s top-selling lager, said operating profit before one-offs would rise by a mid-single-digit percentage in 2019 after a slim 0.3% increase in the Jan-June period.

The company said it would benefit this year from increased sales, higher prices and a consumer shift to more expensive beers. But the company also warned input and logistics costs would rise by a mid-single-digit percentage over the year.

Heineken shares, which hit a record high of 104 euros on Friday, were down 6.1% at 96.82 euros at 0720 GMT, making them the weakest performers in the FTSEurofirst 300 index .FTEU3 of leading European stocks. They are still up by a quarter this year.

Heineken’s input costs in the January to June period rose 8.5%, principally for aluminum used in packaging.

Chief Financial Officer Laurence Debroux told Reuters in a telephone interview that the company’s hedges on aluminum had been less favorable than last year’s.

Heineken’s emerging market operations had also been hit by having to pay hard currency for raw and packaging material with, for example, a weaker Brazilian real.

Costs also increased because of e-commerce investment and an IT upgrade and some sponsorship costs more skewed to the first half of the year.

“If you look at the first half, the month of June was more difficult, mainly because of weather in a number of countries, but the underlying trend of the business is on track … and we’re expecting that to move into the second half,” Debroux said.

For the first half, beer sales volumes rose in all regions, except Europe, where it was hit by poor weather and an unfavorable comparison to last year when the soccer World Cup boosted sales.

Operating profit grew by 0.3% on a like-for-like basis to 1.78 billion euros ($1.98 billion) in the first half, missing analysts’ estimate of 1.92 billion euros, according to IBES data from Refinitiv.

Sales were particularly strong in Vietnam, Heineken’s second most profitable market, rising by a double-digit percentage as it pushes deeper into the country.

Sales in Mexico, the company’s largest market, were up by a low single-digit percentage, and by a high single-digit percentage in Brazil, where Heineken is the second largest brewer.

“We knew the first half was going to be weaker than the second, but clearly the market hadn’t realized the scale of the pressures in the first,” said Trevor Stirling, beverage analyst at Bernstein Securities. “The business itself is in pretty good shape.”

The fall in Heineken’s shares puts it behind Danish rival Carlsberg (CARLb.CO), which is up by almost a third this year, and the world’s top brewer Anheuser-Busch InBev (ABI.BR), which has rebounded by more than 50% partly due to easing concerns over its debt.

($1 = 0.8988 euros)

(This story was refiled to add dropped letter in Heineken in headline)

Reporting by Philip Blenkinsop; Editing by Shounak Dasgupta. Editing by Jane Merriman

Our Standards:The Thomson Reuters Trust Principles.

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