Heineken shares slide as tariff uncertainties spook investors

By Emma Rumney

LONDON (Reuters) -Dutch brewer Heineken's <HEIN.AS> shares slid over 8% on Monday as a forecast-beating profit rise was eclipsed by investor worries over second-half profits and volumes, which Heineken warned may be softer as tariffs weigh on confidence.

The world's No.2 brewer welcomed a trade deal struck between the European Union and the United States and said on Monday that it was weighing all options to deal with growing tariff challenges in the long term, including shifting manufacturing.

Its shares closed down 8.45% despite a 7.4% rise in first-half profit, above analyst estimates, for which it credited growth in once-difficult regions like Africa and Asia as well as cost savings. Beer sales volumes, however, dipped 1.2%.

Analysts and investors pointed to Heineken's warning that volumes would be softer than expected for the remainder of the year as U.S. President Donald Trump's trade salvos disrupt markets in the Americas. A price dispute with retailers meanwhile dented sales in Europe.

The company exports beer, especially its namesake lager, to the U.S. from Europe and Mexico, and has also suffered from the indirect impact on consumer confidence in key markets like Brazil.

CEO Dolf van den Brink welcomed the certainty brought by the trade deal clinched on Sunday, which reduced a threatened 30% U.S. tariff on EU goods to 15% - a rate that would still hit Heineken's U.S. profits.

While some in the industry, such as spirits makers, are hopeful for an exemption, this does not appear to be a prospect for beer.

All options are being considered to mitigate tariffs long-term, including shifting manufacturing, he said, but added that such moves were capital intensive and would first need more consistency in policy.

"We look at all options from ... continuing with our current setup, a more hybrid version, or otherwise," he told journalists on a call. "If and when we deem them financially to be more attractive in the mid- to long-term, we would for sure explore them."

LINGERING TARIFF FEARS, ECONOMIC UNCERTAINTY

Heineken still faces U.S. tariffs of up to 30% on products it produces in Mexico unless the Mexican government can reach an agreement with Washington ahead of an August 1 deadline.

Executives told journalists that since the first quarter, Heineken has also seen economic uncertainty hit spending and confidence in the U.S., Brazil and Mexico.

In Mexico, remittances from the U.S. have fallen significantly, impacting beer industry sales. And U.S. Hispanic consumers were also spending less, van den Brink said.

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

The company also beat forecasts for second quarter revenue and volume, with growth in markets like Vietnam and India, and increased an annual cost-saving goal by a quarter to 500 million euros ($586 million).

"They have slightly downgraded their volume guidance," said Ryann Dean, global analyst at Heineken investor Aylett Fund Managers. "Given everything going on in the world... that to me doesn't feel like a terrible outcome."

Heineken's strong growth in markets like India and China, and consistent profitability, more than offset this, he continued, adding that emerging markets would drive Heineken's long-term volume growth.

Brokerage Jefferies also expressed surprise at the sharp share price fall, which it said was down to worries over softer sales and slower second-half profit growth.

"This represents an attractive buying opportunity in our view, given volume reassurance and profit delivery underpinned by delivery on the cost programme," it said in a note.

($1 = 0.8535 euros)

(Reporting by Emma Rumney; Editing by Lincoln Feast and Joe Bavier, Kirsten Donovan and Nick Zieminski)