heineken n.v. reports 2019 full year results · heineken® brand growth accelerated to 8.3%, with...

Heineken N.V. reports 2019 full year results

Amsterdam, 12 February 2020 – Heineken N.V. (EURONEXT: HEIA; OTCQX: HEINY) announces:

▪ Net revenue (beia) organic growth +5.6%; net revenue (beia) per hectolitre +3.3% ▪ Consolidated beer volume +3.1% ▪ Heineken® volume +8.3%, best performance in over a decade ▪ Operating profit (beia) organic growth +3.9%▪ Operating profit (beia) margin 16.8% (-12 bps) ▪ Net profit (beia) €2,517 million, +4.3% organically ▪ Diluted EPS (beia) €4.38 (2018: €4.18).

CEO STATEMENT Jean-François van Boxmeer, Chairman of the Executive Board / CEO, commented:

"In 2019, we delivered another year of superior top-line growth, with continued strongperformance in the second half. Growth was well balanced with beer volume up 3.1% andrevenue per hectolitre up 3.3%, driven by robust pricing and focus on premiumisation. TheHeineken® brand growth accelerated to 8.3%, with more than 40 countries delivering doubledigit growth. The successful roll-out of Heineken® 0.0 continued and it is now available in 57markets.

Our strategy continues to be growth oriented with an ever-increasing emphasis on thesustainability of this growth, both socially and environmentally. Over the past decade, wehave lowered our water usage by almost a third to 3.4 hectolitres of water per hectolitreproduced, ahead of our 2020 target. We increased the proportion of renewable energy inproduction to 19%. In more than 60 markets, we spent over 10% of Heineken® media budgetson responsible consumption awareness campaigns.

We closed the year with an operating profit (beia) organic growth of 3.9%. In a context ofincreased input costs, we have continued to work on the efficiency of our operations whilststeadily investing behind our brands, our sustainability agenda and our digitaltransformation.

Looking ahead to 2020, we expect our operating profit (beia) to grow by mid-single digit onan organic basis, barring major negative macro economic and political developments."

FINANCIAL SUMMARY1

IFRS Measures € million Totalgrowth BEIA Measures € million Organic

growth2

Revenue 28,521 6.4% Revenue (beia) 28,443 5.2%

Net revenue 23,969 6.6% Net revenue (beia) 23,894 5.6%

Operating profit 3,633 16.4% Operating profit (beia) 4,020 3.9%

Operating profit (beia) margin 16.8%

Net profit 2,166 13.2% Net profit (beia) 2,517 4.3%

Diluted EPS (in €) 3.77 12.5% Diluted EPS (beia) (in €) 4.38 4.9%

Free operating cash flow 2,228

Net debt / EBITDA (beia)3 2.6x1 Consolidated figures are used throughout this report, unless otherwise stated; please refer to the Glossary for an explanation of non-GAAPmeasures and other terms used throughout this report. Last year figures restated for IAS 37. Please refer to page 24 for more details. 2 Organic growth shown, except for Diluted EPS (beia) which is total growth. The impact from IFRS 16 is reflected on all metrics, but isexcluded from the organic growth calculation. 3 Includes acquisitions and excludes disposals on a 12 month pro-forma basis and includes the first time impact of IFRS 16.

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P.O. Box 28 – 1000 AA Amsterdam – The Netherlands Office address - Tweede Weteringplantsoen 21 – 1017 ZD Amsterdam Heineken N.V. - Registered Office at Amsterdam – Trade Register Amsterdam No. 33011433

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FULL YEAR 2020 OUTLOOK STATEMENT

For 2020, we anticipate our business to deliver:▪ A superior top-line growth driven by volume, price and premiumisation▪ A low-single digit increase of input costs per hectolitre, with the benefit of lower prices in

some commodities largely offset by transactional currency headwinds ▪ Continued cost management initiatives and productivity improvements to fuel investment

behind our brands, innovation, e-commerce platforms, technology upgrades andsustainability programmes.

As a result, we currently expect operating profit (beia) to grow by mid-single digit on anorganic basis, barring major negative macro economic or political developments. Inparticular it is at this stage not possible to assess the extent and duration of the impact ofCoronavirus on the economy and on our business.

We also anticipate:▪ An average interest rate (beia) broadly in line with 2019 (2019: 2.9%)▪ An effective tax rate (beia) broadly in line with 2019 (2019: 27.6%) ▪ Capital expenditure related to property, plant and equipment of around €2 billion (2019:

€1.9 billion).

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OPERATIONAL REVIEWTop-line performance continued to be strong in second part of 2019, with a good balancebetween price mix and volume growth. Net revenue per hectolitre (beia) grew in all regions ona constant geographic basis, driven by pricing and premiumisation.

Net revenue (beia) grew 5.6% organically, supported by a 3.3% increase in net revenue(beia) per hectolitre and a 2.2% increase in total consolidated volumes. The underlying pricemix on a constant geographic basis was up 3.4%. In the second half of the year net revenue(beia) increased 5.7% (1H19: 5.6%), with total consolidated volume growth of 2.0% (1H19:2.5%), net revenue (beia) per hectolitre up 3.6% (1H19: 3.0%) and price mix on a constantgeographic basis of 3.2% (1H19: 3.5%).

Consolidated beer volume grew 3.1% organically for the full year. The fourth quarterclosed the year strongly with 4.1% growth, benefiting from double-digit growth in Brazil,Vietnam and Cambodia. Premium volumes increased high-single digit with strong growthacross all regions and continued positive momentum of Heineken®.

Consolidated beer volume(in mhl)

4Q19 4Q18 Organicgrowth

FY19 FY18 Organicgrowth

Heineken N.V. 61.1 58.6 4.1% 241.4 233.8 3.1%

Africa Middle East & Eastern Europe 11.5 11.2 2.7% 43.7 41.7 4.6%

Americas 23.3 22.2 5.2% 85.6 83.3 2.6%

Asia Pacific 8.4 7.8 12.4% 31.1 29.0 11.8%

Europe 17.8 17.4 0.0% 81.0 79.8 -0.2%

Heineken® volume growth accelerated in the fourth quarter to 12.0% to close the year with8.3% growth, the best in a decade. The brand grew across all regions with double digit growthin over 40 markets including Brazil, Mexico, South Africa, Nigeria, the UK, Romania andGermany. Brazil is now the largest market for Heineken® globally and with the addition ofthe UK and Nigeria, now 12 markets sell more than one million hectolitres of the brand. Thesuccessful roll-out of Heineken® 0.0 continues and it is now available in 57 markets.

Heineken® volume (in mhl)

4Q19 Organic growth

FY19 Organic growth

Total 11.2 12.0% 41.8 8.3%

Africa Middle East & Eastern Europe 2.1 6.6% 7.2 11.7%

Americas 3.8 26.6% 13.4 16.2%

Asia Pacific 1.9 7.7% 6.2 2.2%

Europe 3.4 4.0% 14.9 3.1%

The international brand portfolio grew high-single digit, driven by the double digitgrowth of Tiger and Amstel. Tiger performed strongly in Vietnam, Cambodia and Malaysia.Amstel grew strongly in Brazil, Mexico, Russia, South Africa and the UK. Craft volume grew mid-single digit to 5.6 million hectolitres with a double-digit expansionin Europe compensating for lower volume in the Americas. Strong performance from craftpropositions in Italy, France and Spain continued. Lagunitas is now available in more than 35markets with local production in the Netherlands and Brazil.

Cider volume was stable at 5.6 million hectolitres (2018: 5.6 million). Volume increaseddouble digit outside the UK, with South Africa and Russia in the lead. In the UK, volumedeclined high-single digit mainly due to a challenging comparable versus last year. Wecontinue to shape cider in new markets with encouraging results in Vietnam and Mexico.Cider is now locally produced in 18 markets.

Low & No-Alcohol (LONO) volume increased high-single digit, delivering 14.1 millionhectolitres (2018: 13.1 million). The no-alcohol portfolio grew double digit, driven byHeineken® 0.0, other line extensions of leading brands and beer mixes. The Zero Zone, adedicated shelf-space in the off-trade for our non-alcoholic portfolio, is being deployedbeyond Europe.

In addition to new products and categories, innovation at HEINEKEN further includesdraught systems technology. Volume through our proprietary draught systems grew doubledigit. The Blade, our counter-top draught system for small outlets, is now available in 32markets with a range of 30 brands.

Recognising the increasing importance of connecting in a digital world with consumersand customers, in 2019 we added a 5th pillar to our strategic priorities:

• Digital business-to-business platforms continue being deployed at speed. At year end17 markets were operational.

• Beerwulf, our business-to-consumer platform in Europe, continues to gain scale in 11markets.

• Our new Enterprise Resource Planning system for Asia Pacific, Africa and theCaribbean (BASE), is now live in 16 of our 24 operations in scope, standardising corebusiness processes and making us more agile and efficient.

• In Europe we closed the preparation phase of our technology upgrade programme andwill now begin deployment of the first set of capabilities. During 2019 thisrepresented €37 million in expenses.

Operating profit (beia) grew 3.9% organically, driven by strong revenue growth partiallyoffset by input cost inflation and higher investments in global sponsorships, e-commerce and technology upgrades.

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BREWING A BETTER WORLD

Brewing a Better World, one of our five strategic priorities, addresses our commitments topromote health and safety in our operations, protect our water resources, reduce CO2

emissions, source sustainably, advocate responsible consumption and grow with thecommunities where we operate.

Over the past decade, we have lowered our water usage by almost a third to 3.4 hectolitresof water per hectolitre produced and 3.1 hectolitres in water scarce areas in 2019. As we areahead of our 2020 targets, in March 2019 we introduced our 2030 water ambition 'EveryDrop'. Next to continuous improvement in water consumption, we aim to improve the watercatchment areas surrounding our production sites. Today, 15 of our breweries in water scarceareas have started water balancing projects, including nature-based solutions likereforestation and wetland restoration.

In 2018 we set out our 'Drop the C' programme to reduce CO2 emissions, with an

ambitious target to power our production facilities with 70% renewable thermal and electricityenergy by 2030. Thermal energy accounts for nearly 80% of total energy consumption in abrewery. We are at the onset of this journey and reached 19% in 2019.

In 2019 we increased our local sourcing percentage of agricultural supplies in Africa to 44%,although we made progress we have much more to do to reach our ambition of 60%.

We spent over 10% of Heineken® media budgets on “When You Drive Never Drink” and otherresponsible consumption awareness campaigns in more than 60 markets.

For more details on our Brewing a Better World programs and definitions please refer to our2019 Annual Report.

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NET PROFIT Net profit (beia) increased 4.3% organically to €2,517 million (2018: 2,385 million).

The impact of exceptional items and amortisation of acquisition-related intangibles (eia) onnet profit was €351 million (2018: €472 million).

Net profit after exceptional items and amortisation of acquisition-related intangibles was€2,166 million (2018: €1,913 million).

TOTAL DIVIDEND FOR 2019 The Heineken N.V. dividend policy is to pay out a ratio of 30% to 40% of full year net profit(beia). For 2019, payment of a total cash dividend of €1.68 per share (2018: €1.60) will beproposed to the Annual General Meeting on 23 April 2020 ("2020 AGM"). This represents anincrease of 5.0% versus 2018, translating into a 38.4% payout. If approved, a final dividend of€1.04 per share will be paid on 7 May 2020, as an interim dividend of €0.64 per share waspaid on 8 August 2019. The payment will be subject to a 15% Dutch withholding tax. The ex-final dividend date for Heineken N.V. shares will be 27 April 2020.

TRANSLATIONAL CURRENCY CALCULATED IMPACT The translational currency impact for 2019 was positive, amounting to €80 million atconsolidated operating profit (beia) and €47 million at net profit (beia).

Using spot rates as of 7 February 2020 for the remainder of this year, the calculated positivecurrency translational impact would be approximately €55 million at consolidated operatingprofit (beia), and €30 million at net profit (beia).

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EXECUTIVE BOARD COMPOSITIONFollowing his successful 15 year leadership of the Company, Jean-François van Boxmeer willhand over his responsibilities as Chairman of the Executive Board and CEO of Heineken N.V.to Dolf van den Brink on 1 June 2020. The Supervisory Board has announced that it willnominate Dolf van den Brink to be appointed as member of the Executive Board at the 2020AGM for a period of four years. Dolf van den Brink will, subject to appointment by the 2020AGM, join Heineken N.V. on 23 April 2020 as member of the Executive Board, and will workalongside Mr. Van Boxmeer to ensure a smooth and effective transition as Chairman of theExecutive Board and CEO of Heineken N.V. as of 1 June 2020. For more details please see thepress release as issued on 11 February 2020.

SUPERVISORY BOARD COMPOSITIONMrs. Pamela Mars Wright will have completed her four-year appointment term uponconclusion of the 2020 AGM. A proposal for Mrs. Mars Wright’s reappointment as member ofthe Supervisory Board of Heineken N.V. for a period of four years shall be submitted to theAGM.

ENQUIRIES

Media InvestorsTim van der Zanden José Federico Castillo Martinez

Director of Global Communication Investor Relations DirectorMichael Fuchs Janine Ackermann / Robin Achten

Financial Communications Manager Investor Relations Manager / Senior AnalystE-mail: [email protected] E-mail: [email protected] Tel: +31-20-5239355 Tel: +31-20-5239590

INVESTOR CALENDAR HEINEKEN N.V.

Combined financial and sustainability annual report 21 February 2020Trading Update for Q1 2020 22 April 2020Annual General Meeting of Shareholders 23 April 2020Half Year 2020 Results 03 August 2020Trading Update for Q3 2020 28 October 2020

Conference call details HEINEKEN will host an analyst and investor conference call in relation to its 2019 FY resultstoday at 10:00 CET/ 9:00 GMT. The call will be audio cast live via the company’s website:www.theheinekencompany.com/investors/webcasts. An audio replay service will also bemade available after the conference call at the above web address. Analysts and investors candial-in using the following telephone numbers:

United Kingdom (Local): 020 3936 2999Netherlands: 085 888 7233USA: 1 646 664 1960All other locations: +44 20 3936 2999Participation password for all countries: 595244

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Editorial information:HEINEKEN is the world's most international brewer. It is the leading developer and marketer of premium beer and ciderbrands. Led by the Heineken® brand, the Group has a portfolio of more than 300 international, regional, local and specialtybeers and ciders. We are committed to innovation, long-term brand investment, disciplined sales execution and focusedcost management. Through "Brewing a Better World", sustainability is embedded in the business. HEINEKEN has a well-balanced geographic footprint with leadership positions in both developed and developing markets.We employ over 85,000 employees and operate breweries, malteries, cider plants and other production facilities in morethan 70 countries. Heineken N.V. and Heineken Holding N.V. shares trade on the Euronext in Amsterdam. Prices for theordinary shares may be accessed on Bloomberg under the symbols HEIA NA and HEIO NA and on Reuters under HEIN.ASand HEIO.AS. HEINEKEN has two sponsored level 1 American Depositary Receipt (ADR) programmes: Heineken N.V. (OTCQX: HEINY) and Heineken Holding N.V. (OTCQX: HKHHY). Most recent information is available on HEINEKEN's website:www.theHEINEKENcompany.com and follow us on Twitter via @HEINEKENCorp.

Market Abuse Regulation

This press release may contain price-sensitive information within the meaning of Article 7(1) of the EU Market AbuseRegulation.

Disclaimer: This press release contains forward-looking statements with regard to the financial position and results of HEINEKEN’sactivities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differmaterially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factorsthat are beyond HEINEKEN’s ability to control or estimate precisely, such as future market and economic conditions, thebehaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquiredbusinesses and achieve anticipated synergies, costs of raw materials, interest-rate and exchange-rate fluctuations,changes in tax rates, changes in law, change in pension costs, the actions of government regulators and weatherconditions. These and other risk factors are detailed in HEINEKEN’s publicly filed annual reports. You are cautioned not toplace undue reliance on these forward-looking statements, which speak only of the date of this press release. HEINEKENdoes not undertake any obligation to update these forward-looking statements contained in this press release. Marketshare estimates contained in this press release are based on outside sources, such as specialised research institutes, incombination with management estimates.

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REGIONAL OVERVIEW

Net revenue (beia)(in € million)

FY19 FY18 restated1

Organicgrowth

Heineken N.V. 23,894 22,471 5.6%

Africa Middle East & Eastern Europe 3,370 3,051 8.9%

Americas 7,429 6,781 7.5%

Asia Pacific 3,205 2,919 10.9%

Europe 10,629 10,348 2.0%

Head Office & Eliminations -740 -628

Operating profit (beia)(in € million)

FY19 FY18 restated1

Organicgrowth

Heineken N.V. 4,020 3,808 3.9%

Africa Middle East & Eastern Europe 408 411 -0.2%

Americas 1,204 1,118 4.6%

Asia Pacific 1,085 943 12.1%

Europe 1,436 1,452 -0.8%

Head Office & Eliminations -114 -116

Developing markets FY19 HY19

(in mhl or € million unless otherwise stated) Group beervolume

Group netrevenue

Group operating profit (beia)2

Developing markets in: 181.0 12,936 2,372

Africa Middle East & Eastern Europe 45.0

Latin America & the Caribbean 77.8

Asia Pacific 50.2

Europe 8.1

% of Group 65% 49% 54%1 Restated for IAS 37, please refer to page 24 for more details2 Excludes Head Office & Eliminations

Africa Middle East & Eastern Europe

Key financials(in mhl or € million unless otherwise stated)

FY19 FY18 restated1

Totalgrowth

Organicgrowth

Net revenue (beia) 3,370 3,051 10.5% 8.9%

Operating profit (beia) 408 411 -0.6% -0.2%

Operating profit (beia) margin 12.1% 13.5% -135 bps

Total consolidated volume 49.9 47.9 4.3% 4.2%

Beer volume 43.7 41.7 4.7% 4.6%

Non-Beer volume 6.2 6.1 1.7% 1.3%

Third party products volume 0.1 0.1 4.2% 4.2%

Licensed beer volume 2.4 2.5

Group beer volume 46.5 44.71 Restated for IAS 37, please refer to page 24 for more details

Consolidated beer volume grew 4.6% organically driven by South Africa, Russia,Mozambique, Nigeria and the Democratic Republic of Congo (DRC). The premium portfolioincreased double digit with strong performance in Russia, South Africa, Nigeria and Ethiopiathrough a combination of strong growth of Heineken®, international brand introductions andlocal premium offerings.

Net revenue (beia) grew 8.9% organically, with total consolidated volume up 4.2% and netrevenue (beia) per hectolitre up 4.6%. Price mix was up 2.9% on a constant geographic basisdriven by strong price mix in South Africa, Russia, Ethiopia and Egypt, partially offset byNigeria. Currency translation positively impacted net revenue by €38 million mainly driven bythe Egyptian Pound, the Russian Ruble and the Nigerian Naira.

Operating profit (beia) was stable as growth in South Africa, the DRC, Egypt and Ethiopiawas offset by declines in Nigeria and Ivory Coast. Currency translation positively impactedoperating profit (beia) by €12 million mainly due to the Egyptian Pound and the BurundianFranc.

In Nigeria, beer volume increased low-single digit, in line with the total market. Thepremium portfolio grew double digit, led by Heineken® and Tiger.

In Russia, beer volume increased mid-single digit, driven by the double digit growth of thepremium portfolio due to the new licensed brands Miller Genuine Draft and Staropramen aswell as Amstel and Heineken®.

In South Africa, total volume was up double digit, due to the strong performance ofHeineken®, Amstel and Strongbow despite deteriorating economic conditions.

In Ethiopia, beer volume increased slightly, held back by a price increase at the beginning ofthe year and continued social unrest. The premium portfolio more than doubled its volumedriven by Bedele Special.

In the DRC, beer volume grew high-single digit. The overall economy remains fragile.

In Egypt, total volume increased double digit driven by the strong performance of the LONOportfolio.

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Americas


FY19 FY18 restated1

Totalgrowth

Organicgrowth

Net revenue (beia) 7,429 6,781 9.6% 7.5%

Operating profit (beia) 1,204 1,118 7.6% 4.6%



Beer volume 85.6 83.3 2.7% 2.6%

Non-Beer volume 8.9 9.9 -10.5% -10.5%

Third party products volume 0.2 0.4 -53.5% -53.5%



Consolidated beer volume increased 2.6% organically following a strong fourth quarterperformance with 5.2% growth. The premium portfolio grew double digit led by Heineken® inBrazil. Non-beer volume declined -10.5% following the delisting of a low margin brand insome regions of Brazil.

Net revenue (beia) grew 7.5% organically, with total consolidated volumes up 1.0% and netrevenue (beia) per hectolitre up 6.4%. Price mix was up 7.1% on a constant geographic basis,mainly driven by Brazil with growth in the mid-teens due to premiumisation and pricing.Favourable currency developments impacted net revenue by €116 million, mainly driven bythe Mexican Peso and the US Dollar.

Operating profit (beia) increased by 4.6% organically, with growth in Mexico and Brazilpartly offset by the USA. Currency translation positively impacted operating profit (beia) by€22 million, primarily from Mexico and the USA.

In Mexico, beer volume grew low-single digit, driven by double digit growth of the premiumportfolio, led by Heineken®, the launch of Heineken® 0.0 and the national roll-out of AmstelUltra. The impact of the OXXO contract renewal continued in line with expectations.

In Brazil, beer volume grew mid-single digit, with the fourth quarter growing double digit.Positive momentum continued for the premium and mainstream portfolios, with strongdouble digit growth of Heineken®, Amstel and Devassa. The economy portfolio declinedhigh-single digit, following two price increases during the year.

In the USA, beer volume declined by mid-single digit, driven by Tecate and shortages of24 oz cans. Heineken® volumes were slightly down including the benefit from theintroduction of Heineken® 0.0. The trends for Dos Equis continue to improve, particularly inthe on-premise.

In Haiti, our largest operation in the Caribbean, beer volume declined double digit as socialunrest continued to disrupt our business into the fourth quarter.

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Asia Pacific


FY19 FY18 restated1

Totalgrowth

Organicgrowth

Net revenue (beia) 3,205 2,919 9.8% 10.9%

Operating profit (beia) 1,085 943 15.0% 12.1%

Operating profit (beia) margin 33.8% 32.3% 154 bps


Beer volume 31.1 29.0 7.2% 11.8%

Non-Beer volume 0.7 0.6 17.1% 17.4%

Third party products volume 0.0 0.1 -36.2% -36.2%



Consolidated beer volume grew 11.8% organically, driven by double digit growth inVietnam, Cambodia, Myanmar, Korea and Japan. Premium volume grew high-single digitdriven by the double digit growth of Tiger and the return to growth of Heineken® driven byimproved performance across multiple countries.

Net revenue (beia) grew 10.9% organically, total volume up 11.8% whilst net revenue (beia)per hectolitre was down 0.8%. Price mix was up 0.8% on a constant geographic basis.Currency translation positively impacted net revenue by €114 million mainly from Vietnam,Cambodia and Indonesia.

Operating profit (beia) increased 12.1% organically driven by Vietnam and Cambodia.Positive currency movement across Vietnam, Cambodia and Indonesia impacted operatingprofit by €41 million.

In Vietnam beer volume was up double digit on the back of favourable beer marketconditions and our portfolio expansion strategy, driven by Tiger, Larue and Heineken®supplemented by the launch of Heineken® Silver.

In Indonesia beer volume increased slightly as the beer market was negatively impacted byan increase in excise duties at the beginning of the year.

In Cambodia, beer volume was up strong double digit driven by Anchor and Tiger.

In Malaysia, beer volume grew high-single digit led by Tiger and Heineken®. In Singapore,beer volume grew mid-single digit and the Tiger range was expanded with the launch ofTiger Crystal. Heineken® 0.0 was introduced in both markets during the year.

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Europe


FY19 FY18 restated1

Totalgrowth

Organicgrowth

Net revenue (beia) 10,629 10,348 2.7% 2.0%

Operating profit (beia) 1,436 1,452 -1.0% -0.8%


Total consolidated volume 99.7 98.6 1.0% -0.4%

Beer volume 81.0 79.8 1.5% -0.2%

Non-Beer volume 10.6 10.8 -1.9% -1.9%

Third party products volume 8.1 8.0 0.5% -0.2%



Consolidated beer volume was marginally lower on an organic basis, with the region backto growth in the second half. The premium and LONO portfolios grew mid-single digit, withHeineken® 0.0 growing mid-double digit. Total consolidated volume declined 0.4%organically.

Net revenue (beia) increased by 2.0% organically with net revenue (beia) per hectolitre up2.3%. Price mix was up 1.8% on a constant geographic basis driven by the growth ofHeineken®, Desperados, Birra Moretti, local premium propositions and craft. Operatingprofit (beia) decreased by 0.8% organically, impacted by a significant step up in investmentto upgrade our technology and digital platforms.

In the UK total volume declined low-single digit. Beer volume increased low-single digit,driven by the premium portfolio led by Heineken® and Birra Moretti. Cider volume decreasedhigh-single digit, mainly due to a challenging comparable versus last year. Our estate ofmore than 2,500 pubs saw a step up in investment and outperformed the market.

In France beer volume grew low-single digit in the fourth quarter to finish the full year with aslight decline, outperforming the market. Our premium and craft portfolio continued to growdouble digit, led by Affligem and Lagunitas. We acquired a minority interest in Gallia, asuccessful Parisian craft brand.

In Spain beer volume declined slightly, with growth in the on-trade offset by a partialdelisting at a large retailer. Our craft and cider portfolios grew double digit and the premiumportfolio high-single digit.

In Italy beer volume was up mid-single digit driven by the double digit growth of thepremium portfolio, led by Ichnusa and Messina.

In Poland beer volume was down high-single digit mainly driven by a double digit decline ofthe economy portfolio in a declining market. The premium and LONO portfolio continued togrow. The integration of Namysłów is progressing well.

In the Netherlands, beer volume declined mid-single digit mainly due to a challengingcomparable versus the good summer of last year. We acquired an interest in Oedipusbrewery, a strong Amsterdam based craft brand.

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FINANCIAL REVIEW

Key figures(in mhl or € million unless otherwise stated) FY18

restated1Currency

translation

Consolidationimpact and

IFRS 16

Organicgrowth FY19 Organic

growth

Revenue 26,811 28,521

Eia 0 78

Revenue (beia) 26,811 326 -89 1,395 28,443 5.2%

Excise tax expense (beia) -4,340 -48 -31 -131 -4,550 -3.0%

Net Revenue (beia) 22,471 278 -119 1,264 23,894 5.6%

Total other expenses (beia) -18,663 -198 98 -1,112 -19,874 -6.0%

Operating profit (beia) 3,808 80 -21 153 4,020 3.9%

Net interest income/(expenses) (beia) -404 -4 -66 40 -435 9.7%

Other net finance income/(expenses) (beia) -57 0 0 -6 -62 -7.9%

Share of net profit of assoc./ JVs (beia) 161 0 56 10 228 6.1%

Income tax expense (beia) -880 -20 14 -87 -974 -9.7%

Non-controlling interests (beia) -244 -9 -3 -5 -260 -2.0%

Net profit (beia) 2,385 47 -20 105 2,517 4.3%

Eia -472 -351

Net profit 1,913 2,166

Note: due to rounding, this table will not always cast1 Restated for IAS 37, refer to page 24 for more details

Main changes in consolidation and IFRS 16 ▪ On 1 April 2019 Grupa Żywiec S.A., a HEINEKEN subsidiary, completed the acquisition

of 100% of the share capital of Browar Namysłów Sp. z o.o. ▪ On 29 April 2019 HEINEKEN completed all transactions to form a long-term strategic

partnership with China Resources Enterprise, Limited and China Resources Beer(Holdings) Co. Ltd. (CR Beer), including the transfer of its operating entities in China toCR Beer. HEINEKEN's share of CR Beer's profits is reported with a two month delay,starting on 1 July 2019.

▪ On 2 May 2019 HEINEKEN acquired a majority stake in Biela y Bebidas del Ecuador S.A.BIELESA.

▪ HEINEKEN has implemented IFRS 16 per 1 January 2019 by applying the modifiedretrospective method, meaning that the 2018 comparative numbers are not restated.The impact from IFRS 16 on the contracts in scope as per 1 January 2019 is excludedfrom the organic growth and is shown as a consolidation impact in the financial reviewand consolidated metrics tables. Please refer to page 23 for more details.

RevenueRevenue was €28,521 million, a growth of 6.4% (2018: €26,811 million). Revenue (beia)increased organically 5.2% to €28,443 million (2018: €26,811 million).

Net revenue Net revenue grew 6.6% to €23,969 million. Net revenue (beia) increased by 5.6% organicallyto €23,894 million, with total consolidated volume growth of 2.2% and an increase in netrevenue (beia) per hectolitre of 3.3%. Currency developments had a positive impact of €278million, mainly driven by favourable development versus the Euro of the Mexican Peso, theVietnamese Dong and the US Dollar. The negative impact of consolidation changes was €119million mainly related to China.

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Total other expenses (beia) Total other expenses (beia) were €19,874 million, up 6.0% on an organic basis. Input costsincreased 5% on a per hectolitre basis, due to inflation in commodities and adversetransactional currency impacts. Marketing and selling (beia) expenses increased organicallyby 4.2% to €2,618 million, representing 11.0% of net revenue (beia) (2018: 11.1%).

Operating profit Operating profit grew by 16.4% to €3,633 million driven by the underlying growth and lowerimpact from exceptional items. Operating profit (beia) was €4,020 million, up 3.9%organically. Growth was driven by the strong top-line performance partially offset by higherinput costs and higher expenses in global sponsorships, e-commerce and technologyupgrades. Currency translation had a positive impact of €80 million. Consolidation changeshad a negative impact of €21 million.

Net finance expenses (beia)The average interest rate (beia) in 2019 was 2.9% (2018: 3.2%). Net interest expenses (beia)increased by €31 million to €435 million, mainly due to the first time inclusion of interestexpenses on lease liabilities. Other net finance expenses (beia) increased to €62 million,including the interest expense on the net pension liability and the impact of currencyrevaluation on outstanding payables in foreign currencies.

Share of net profit of associates and joint ventures (beia) The share of net profit of associates and joint ventures (beia) amounted to €228 million,including the attributable profit from CR Beer for the period of May to October. The organicincrease was €10 million, reflecting mainly higher profits from Costa Rica.

Income tax expense (beia)The effective tax rate (beia) was 27.6% (2018: 26.3%). The increase is driven by new interestdeduction limitation rules in the Netherlands in 2019 and one-off benefits in 2018.

Net profit Net profit for 2019 was €2,166 million (2018: €1,913 million). Net profit (beia) increasedorganically by €105 million (4.3%) to €2,517 million. The impact of currency translation waspositive by €47 million and consolidation changes had a negative impact of €20 million.

Exceptional items & amortisation of acquisition related intangibles (eia) The impact of eia on net profit amounted to €351 million (2018: €472 million). On operatingprofit the impact of eia amounted to €387 million (2018: €687 million).

Amortisation of acquisition-related intangibles recorded in operating profit amounted to€309 million (2018: €311 million). Net exceptional items in operating profit amounted to €78million net expense (2018: €376 million net expense), of which:

• €78 million benefit on revenue, mainly relating to tax credits in Brazil (no impact in2018)

• €2 million expenses on excise tax (2018: €18 million benefit)• €91 million restructuring expenses (2018: €122 million) • €85 million of impairments (2018: €183 million, mainly in the DRC)• €57 million net gain on disposals, mainly relating to the sale of operating entities in

China and Hong Kong (2018: €4 million net gain) • €35 million other net expenses (2018: €94 million).

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Please refer to page 22 for a description of the exceptional items and amortisation ofacquisition-related intangibles below operating profit.

Capital expenditure and cash flow Capital expenditure related to property, plant and equipment amounted to €1,915 million in2019 (2018: €1,888 million) representing 8.0% of net revenues (beia). This includesinvestments in capacity expansions in Vietnam, Brazil and South Africa and a step-up ininvestment to refurbish the pub estate in the UK.

Free operating cash flow amounted to €2,228 million (2018: €2,246 million), including theone-off positive impact of the adoption of IFRS 16 (for more details please refer to page 23).Cash flow from trade and other payables has continued to improve, although less than theprevious year.

Financial structureTotal gross debt amounted to €17,052 million (31 December 2018: €14,986 million). Netdebt increased to €15,259 million (31 December 2018: €12,081 million) following thefinancing of the transactions in China and the recognition of lease obligations as a financialliability under IFRS 16.

Including the effect of cross-currency swaps, 60% of net debt is Euro-denominated and 21%is US dollar and US dollar proxy currencies. The pro-forma net debt/EBITDA (beia) ratio was2.6x on 31 December 2019 (FY 2018: 2.3x). HEINEKEN remains committed to the Company’slong-term target net debt/EBITDA (beia) ratio of below 2.5x.

Average number of sharesHEINEKEN has 576,002,613 shares in issue. For the calculation of 2019 basic EPS, theweighted impact of the treasury shares (including shares purchased for the employeeincentive programme and 5.2 million shares sold to CRE on 29 April 2019) results in anumber of weighted average shares outstanding of 573,643,551 (570,146,069 in 2018).

For the calculation of 2019 diluted EPS, the number of weighted average outstanding sharesis adjusted for the amount of shares to be delivered under the employee incentiveprogramme, resulting in a weighted average diluted number of shares of 574,217,111(570,663,632 in 2018).

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Full Year 2019 Consolidated MetricsIn mhl or €million unless otherwisestated & consolidated figures unless

otherwise statedFY18 IAS 37

FY18restated

for IAS 37

Currencytranslation

Cons.impact and

IFRS 16

Organicgrowth FY19 Organic

growth

Africa, Middle East & Eastern EuropeNet revenue (beia) 3,051 — 3,051 38 10 271 3,370 8.9%Operating profit (beia) 411 — 411 12 -14 -1 408 -0.2%Operating profit (beia) margin 13.5% 13.5% 12.1%Total consolidated volume 47.9 0.1 2.0 49.9 4.2%

Beer volume 41.7 0.1 1.9 43.7 4.6%Non-beer volume 6.1 — 0.1 6.2 1.3%

Third party products volume 0.1 — 0.0 0.1 4.2%

Licensed beer volume 2.5 2.4Group beer volume 44.7 46.5

AmericasNet revenue (beia) 6,781 — 6,781 116 24 509 7,429 7.5%Operating profit (beia) 1,178 -60 1,118 22 9 54 1,204 4.6%Operating profit (beia) margin 17.4% 16.5% 16.2%Total consolidated volume 93.6 0.1 1.0 94.7 1.0%

Beer volume 83.3 0.1 2.2 85.6 2.6%Non-beer volume 9.9 — -1.0 8.9 -10.5%

Third party products volume 0.4 — -0.2 0.2 -53.5%


Asia PacificNet revenue (beia) 2,919 — 2,919 114 -147 318 3,205 10.9%Operating profit (beia) 943 — 943 41 -13 114 1,085 12.1%Operating profit (beia) margin 32.3% 32.3% 33.8%Total consolidated volume 29.7 -1.3 3.5 31.8 11.8%

Beer volume 29.0 -1.3 3.4 31.1 11.8%Non-beer volume 0.6 — 0.1 0.7 17.4%

Third party products volume 0.1 — 0.0 0.0 -36.2%


EuropeNet revenue (beia) 10,348 — 10,348 13 66 202 10,629 2.0%Operating profit (beia) 1,452 — 1,452 3 -5 -12 1,436 -0.8%Operating profit (beia) margin 14.0% 14.0% 13.5%Total consolidated volume 98.6 1.4 -0.4 99.7 -0.4%

Beer volume 79.8 1.4 -0.2 81.0 -0.2%Non-beer volume 10.8 — -0.2 10.6 -1.9%

Third party products volume 8.0 0.1 0.0 8.1 -0.2%


Head Office & EliminationsNet revenue (beia) -628 — -628 -2 -73 -37 -740 n.a.Operating profit (beia) -116 — -116 3 1 -2 -114 n.a.Heineken N.V.Net revenue (beia) 22,471 — 22,471 278 -119 1,264 23,894 5.6%Total expenses (beia) -18,603 -60 -18,663 -198 98 -1,112 -19,874 -6.0%Operating profit (beia) 3,868 -60 3,808 80 -21 153 4,020 3.9%Operating profit (beia) margin 17.2% 16.9% 16.8%Share of net profit of associates /JVs 161 — 161 — 56 10 228 6.1%Net Interest income / (expenses) (beia) -405 1 -404 -4 -66 40 -435 9.7%Other net finance income / (expenses) -57 — -57 — — -6 -62 -7.9%Income tax expense (beia) -900 20 -880 -20 14 -87 -974 -9.7%Minority Interests -244 — -244 -9 -3 -5 -260 -2.0%Net profit (beia) 2,424 -39 2,385 47 -20 105 2,517 4.3%Total consolidated volume 269.8 0.3 6.1 276.1 2.2%


Third party products volume 8.6 0.1 -0.2 8.4 -2.7%


Note: due to rounding, this table will not always cast

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Fourth Quarter 2019 MetricsIn mhl unless otherwise stated & consolidated

figures unless otherwise stated 4Q18 Consolidationimpact

Organicgrowth 4Q19 Organic

growth

Africa, Middle East & Eastern EuropeTotal consolidated volume 12.7 — 0.4 13.1 3.2%

Beer volume 11.2 — 0.3 11.5 2.7%Non-beer volume 1.5 — 0.1 1.6 6.8%

Third party products volume — — — — —


AmericasTotal consolidated volume 24.8 — 0.7 25.6 2.8%

Beer volume 22.2 — 1.2 23.3 5.2%Non-beer volume 2.7 — -0.6 2.2 -20.4%



Asia PacificTotal consolidated volume 8.0 -0.4 1.0 8.6 12.2%

Beer volume 7.8 -0.4 1.0 8.4 12.4%Non-beer volume 0.2 — 0.0 0.2 9.1%

Third party products volume — — — — —


EuropeTotal consolidated volume 21.7 0.4 0.0 22.1 0.0%




Heineken N.V.Total consolidated volume 67.2 0.1 2.1 69.4 3.1%




Note: due to rounding, this table will not always cast

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Consolidated financial statements for the full year 2019

Contents Page

Consolidated income statement 18

Consolidated statement of comprehensive income 18

Consolidated statement of financial position 19

Consolidated statement of cash flows 20

Consolidated statement of changes in equity 21

Non-GAAP measures 22

Update on accounting policies 23

Glossary 25

The 2019 financial information included in the primary statements attached to this press release are derived from the Annual Report 2019.This Annual Report has been authorised for issue. The Annual Report has not yet been published by law and still has to be adopted by theAnnual General Meeting of Shareholders on 23 April 2020.

In accordance with section 393, Title 9, Book 2 of the Netherlands Civil Code, Deloitte Accountants B.V. has issued an unqualifiedIndependent auditors’ report on the Financial Statements.

The full Annual Report will be available for download on the HEINEKEN website (www.theheinekencompany.com) as of 21 February 2020.

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P.O. Box 28 – 1000 AA Amsterdam – The Netherlands Office address - Tweede Weteringplantsoen 21 – 1017 ZD Amsterdam Heineken N.V. - Registered Office at Amsterdam – Trade Register Amsterdam No. 33011433 of 27

Consolidated Income Statement

2019 2018*For the year ended 31 DecemberIn millions of €Revenue 28,521 26,811Excise tax expense (4,552) (4,322)Net revenue 23,969 22,489Other income 95 75Raw materials, consumables and services (14,592) (14,001)Personnel expenses (3,880) (3,749)Amortisation, depreciation and impairments (1,959) (1,693)Total other expenses (20,431) (19,443)Operating profit 3,633 3,121Interest income 75 71Interest expenses (529) (492)Other net finance income/(expenses) (59) (64)Net finance expenses (513) (485)Share of profit of associates and joint ventures 164 210Profit before income tax 3,284 2,846Income tax expense (910) (741)Profit 2,374 2,105Attributable to:Shareholders of the Company (net profit) 2,166 1,913Non-controlling interests 208 192Profit 2,374 2,105Weighted average number of shares – basic 573,643,551 570,146,069Weighted average number of shares – diluted 574,217,111 570,663,632Basic earnings per share (€) 3.78 3.36Diluted earnings per share (€) 3.77 3.35

*Restated for IAS 37. Refer to page 24 for further details.

Consolidated Statement ofComprehensive Income

2019 2018*For the year ended 31 DecemberIn millions of €Profit 2,374 2,105Other comprehensive income, net of tax:Items that will not be reclassified to profit or loss:Remeasurement of post-retirement obligations (210) 221Net change in fair value through OCI investments 9 11Items that may be subsequently reclassified to profit or loss:Currency translation differences 369 (106)Change in fair value of net investment hedges (43) (3)Change in fair value of cash flow hedges 64 (67)Cash flow hedges reclassified to profit or loss 21 (77)Net change in fair value through OCI investments 1 —Cost of hedging (5) 6Share of other comprehensive income of associates/joint ventures (20) (36)Other comprehensive income, net of tax 186 (51)Total comprehensive income 2,560 2,054

Attributable to:Shareholders of the Company 2,328 1,858Non-controlling interests 232 196Total comprehensive income 2,560 2,054

*Restated for IAS 37. Refer to page 24 for further details.

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Consolidated Statement of Financial Position2019 2018* 2019 2018*

As at 31 DecemberIn millions of €Intangible assets 17,769 17,459 Shareholders' equity 16,147 14,525Property, plant and equipment 13,269 11,359 Non-controlling interests 1,164 1,183Investments in associates and joint ventures 4,868 2,021 Total equity 17,311 15,708Loans and advances to customers 277 341Deferred tax assets 647 626 Borrowings 13,366 12,628Other non-current assets 1,255 1,220 Post-retirement obligations 1,189 954Total non-current assets 38,085 33,026 Provisions 756 833

Deferred tax liabilities 1,422 1,431Inventories 2,213 1,920 Other non-current liabilities 153 168Trade and other receivables 4,123 3,795 Total non-current liabilities 16,886 16,014Current tax assets 123 71Derivative assets 28 35 Borrowings 3,686 2,358Cash and cash equivalents 1,821 2,903 Trade and other payables 7,520 6,891Assets classified as held for sale 111 401 Returnable packaging deposits 565 569Total current assets 8,419 9,125 Provisions 184 164

Current tax liabilities 283 245Derivative liabilities 69 70Liabilities associated with assets classified as held for sale — 132Total current liabilities 12,307 10,429

Total assets 46,504 42,151 Total equity and liabilities 46,504 42,151*Restated for IAS 37. Refer to page 24 for further details.

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Consolidated statement of cash flows2019 2018*

For the year ended 31 DecemberIn millions of €Operating activitiesProfit 2,374 2,105Adjustments for:Amortisation, depreciation and impairments 1,959 1,693Net interest expenses 454 421

Other income (95) (75)

Share of profit of associates and joint ventures and dividendincome on fair value through OCI investments (173) (228)

Income tax expenses 910 741Other non-cash items 240 201Cash flow from operations before changes in working capitaland provisions 5,669 4,858

Change in inventories (257) (129)Change in trade and other receivables (245) (66)Change in trade and other payables and returnable packagingdeposits 510 908

Total change in working capital 8 713Change in provisions and post-retirement obligations (121) (31)Cash flow from operations 5,556 5,540Interest paid (528) (555)Interest received 52 118Dividends received 181 109Income taxes paid (924) (824)Cash flow related to interest, dividend and income tax (1,219) (1,152)Cash flow from operating activities 4,337 4,388

.*Restated for IAS 37. Refer to page 24 for further details.

2019 2018*For the year ended 31 DecemberIn millions of €Investing activitiesProceeds from sale of property, plant and equipment andintangible assets 177 111

Purchase of property, plant and equipment (1,915) (1,888)Purchase of intangible assets (186) (167)Loans issued to customers and other investments (249) (239)Repayment on loans to customers and other investments 64 41Cash flow (used in)/from operational investing activities (2,109) (2,142)Free operating cash flow 2,228 2,246

Acquisition of subsidiaries, net of cash acquired (183) (70)Acquisition of/additions to associates, joint ventures andother investments (2,875) (159)

Disposal of subsidiaries, net of cash disposed of 244 15Disposal of associates, joint ventures and other investments 50 1Cash flow (used in)/from acquisitions and disposals (2,764) (213)Cash flow (used in)/from investing activities (4,873) (2,355)Financing activitiesProceeds from borrowings 2,288 1,694Repayment of borrowings (2,150) (1,545)Payment of lease commitments (259) —Dividends paid (1,223) (1,090)Purchase own shares and shares issued 428 (20)Acquisition of non-controlling interests (103) (2)Other 3 (4)Cash flow (used in)/from financing activities (1,016) (967)

Net cash flow (1,552) 1,066Cash and cash equivalents as at 1 January 2,248 1,177Effect of movements in exchange rates (9) 5Cash and cash equivalents as at 31 December 687 2,248

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYIn millions of €

Sharecapital

Sharepremium

Translationreserve

Hedgingreserve

Cost of hedgingreserve

Fair valuereserve

Other legalreserves

Reserve forown shares

Retainedearnings

Shareholders of theCompany

Non-controllinginterests Total equity

Balance as at 31 December 2017 922 2,701 (3,124) 112 — 331 962 (410) 11,827 13,321 1,200 14,521Changes in accounting policy* — — (21) — 3 — — — 174 156 1 157Balance as at 1 January 2018* 922 2,701 (3,145) 112 3 331 962 (410) 12,001 13,477 1,201 14,678Profit* — — — — — — 214 — 1,699 1,913 192 2,105Other comprehensive income — — (143) (150) 6 11 — — 221 (55) 4 (51)Total comprehensive income — — (143) (150) 6 11 214 — 1,920 1,858 196 2,054Transfer to retained earnings — — — — — — (80) — 80 — — —Dividends to shareholders — — — — — — — — (866) (866) (212) (1,078)Purchase/reissuance own/non-controllingshares — — — — — — — (38) — (38) 20 (18)

Own shares delivered — — — — — — — 33 (33) — — —Share-based payments — — — — — — — — 26 26 — 26Acquisition of non-controlling interests — — — — — — — — 26 26 (30) (4)Changes in consolidation — — — — — — — — 42 42 8 50Balance as at 31 December 2018* 922 2,701 (3,288) (38) 9 342 1,096 (415) 13,196 14,525 1,183 15,708

In millions of €Share

capitalShare

premiumTranslation

reserveHedgingreserve

Cost of hedgingreserve

Fair valuereserve

Other legalreserves

Reserve forown shares

Retainedearnings

Shareholders of theCompany

Non-controllinginterests Total equity

Balance as at 31 December 2018* 922 2,701 (3,288) (38) 9 342 1,096 (415) 13,196 14,525 1,183 15,708Changes in accounting policy* — — — — — — — — 3 3 — 3Balance as at 1 January 2019* 922 2,701 (3,288) (38) 9 342 1,096 (415) 13,199 14,528 1,183 15,711Profit — — — — — — 172 — 1,994 2,166 208 2,374Other comprehensive income — — 287 85 (5) 10 — — (215) 162 24 186Total comprehensive income — — 287 85 (5) 10 172 — 1,779 2,328 232 2,560Realised hedge results from non-financialassets — — — (66) — — — — — (66) — (66)

Transfer to retained earnings — — 3 — — (39) (153) — 189 — — —Dividends to shareholders — — — — — — — — (949) (949) (272) (1,221)Purchase/reissuance own/non-controllingshares — — — — — — — 320 98 418 11 429

Own shares delivered — — — — — — — 32 (32) — — —Share-based payments — — — — — — — — 14 14 — 14Acquisition of non-controlling interests — — — — — — — — (126) (126) 5 (121)Changes in consolidation — — — — — — — — — — 5 5Balance as at 31 December 2019 922 2,701 (2,998) (19) 4 313 1,115 (63) 14,172 16,147 1,164 17,311

*Restated for IAS 37 (refer to page 24 for further details), IFRS 16 and IFRS 9.

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NON-GAAP MEASURES In the internal management reports, HEINEKEN measures itssegmental performance primarily based on operating profit andoperating profit beia (before exceptional items and amortisation ofacquisition-related intangible assets).

In millions of € 2019 2018*Operating profit (beia) 4,020 3,808Amortisation of acquisition-related intangible assets and exceptionalitems included in operating profit (387) (687)

Share of profit of associates and joint ventures 164 210Net finance expenses (513) (485)Profit before income tax 3,284 2,846

Profit attributable to shareholders of the Company (net profit) 2,166 1,913Amortisation of acquisition-related intangible assets included inoperating profit 309 311

Exceptional items included in operating profit 78 376Exceptional items included in net finance expenses/(income) 16 25Exceptional items and amortisation of acquisition-related intangibleassets included in share of profit of associates and joint ventures 64 (50)

Exceptional items included in income tax expense (64) (138)Allocation of exceptional items and amortisation of acquisition-related intangibles to non-controlling interests (52) (52)

Net profit (beia) 2,517 2,385

Due to rounding, this table will not always cast.*Restated for IAS 37. Refer to page 24 for further details.

The 2019 exceptional items and amortisation of acquisition-related intangibles on net profit amount to €351 million (2018:€472 million). This amount consists of:

• €309 million (2018: €311 million) of amortisation ofacquisition-related intangibles recorded in operating profit.

• €78 million (2018: €376 million) of exceptional itemsrecorded in operating profit. This includes €78 millionexceptional benefits on revenue, mainly relating to taxcredits in Brazil (no impact in 2018) and €2 million

exceptional excise tax expenses (2018: €18 millionexceptional excise tax benefit), €91 million of restructuringexpenses (2018: €122 million), €85 million of impairments(2018: €183 million mainly in the DRC), €57 million netgain on disposals, mainly relating to the sale of operatingentities in China and Hong Kong (2018: €4 million net gain)and €35 million of other net exceptional expenses (2018:€94 million).

• €16 million (2018: €25 million) of exceptional items in netfinance expenses, mainly related to interest income over taxcredits in Brazil and interest expenses over tax liabilitiesand pre-financing of acquisitions.

• €64 million of exceptional items and amortisation ofacquisition-related intangibles included in share of profit ofassociates and joint ventures (2018: €50 million netbenefits, mainly related to the early termination of a brandlicense by CCU S.A. in exchange for cash and a portfolio ofbrands in Argentina).

• €64 million (2018: €138 million) in income tax expense,which includes the tax impact on exceptional items andamortisation of acquisition-related intangible assets of €57million (2018: €104 million) and an exceptional income taxnet benefit of €7 million (2018: €34 million).

• Total amount of eia allocated to non-controlling interestsamounts to €52 million (2018: €52 million).

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Update on new standards applicable as per 1 January 2019

IFRS 16 HEINEKEN has implemented IFRS 16 'Leases' as at 1 January 2019,replacing existing guidance on leases, including IAS 17. Theadoption of IFRS 16 has changed the accounting for leases asunder the new standard all operating lease contracts arerecognised on HEINEKEN’s statement of financial position ('balancesheet') by recognising a right of use (ROU) asset and a leaseliability, except for short-term and low value leases. Leaseexpenses previously recorded in the income statement arereplaced by depreciation and interest expenses for all leasecontracts in scope of the standard.

HEINEKEN has implemented IFRS 16 as at 1 January 2019 byapplying the modified retrospective method, meaning that the2018 comparative numbers are not restated. HEINEKEN has around30,000 operating leases mainly relating to stores, pubs, offices,warehouses, cars and (forklift) trucks.

In some countries, HEINEKEN is operating both as a lessee (referredto as head lease contracts) and a lessor (referred to as subleasecontracts) for pubs. HEINEKEN has analysed the sublease contractsand concluded that under the new standard these contracts aretreated as a finance lease, where under the previous standardthese same leases were treated as an operating lease.

In the transition to IFRS 16 HEINEKEN applied the followingtransition expedients:

• Use the option to grandfather the lease classification forexisting contracts

• Use the transition option for leases with a remainingcontract period of less than one year, meaning that theseleases will not be recorded on balance and the paymentswill be expensed in the income statement on a straight-linebasis

• Measure the ROU asset based on the lease liabilityrecognised

As a result of applying IFRS 16, HEINEKEN recognised €1,034million of ROU assets, €252 million of lease receivables and€1,252 million of lease liabilities as at 1 January 2019. A netamount of €31 million of lease prepayments, lease accruals andonerous lease provisions has been included in ROU assets as at 1January 2019. An amount of €3 million has been recorded inretained earnings. The ROU assets are included in Property, plantand equipment. The lease receivables are included under Othernon-current assets and Trade and other receivables. The leaseliabilities are included under current and non-current Borrowings.As at 1 January 2019, deferred tax assets of €291 million relatedto lease liabilities, and deferred tax liabilities of €291 millionrelated to ROU assets and lease receivables have been recognised.These deferred tax positions are offset and reported on a net basisin the statement of financial position.

When measuring the lease liability, HEINEKEN discounted the leasepayments using the incremental borrowing rate as at 1 January2019. The weighted average incremental borrowing rate applied is4.3%.

During 2019, HEINEKEN reported €238 million depreciation andimpairment of ROU assets and €55 million interest costs on leaseliabilities. In 2018, operating lease expenses were reported underRaw materials, consumables and services and Personnel expenses.No material impact on tax expenses.

As a result of the treatment of subleases as a finance lease,revenue decreased with approximately €54 million. The decreasein revenue is fully offset by a decrease in expenses on the headleases and primarily impacts The Netherlands and Belgium.

The lease payments are reported under 'Interest paid' (2019: €55million) and 'Payment of lease commitments' (2019: €259 million)

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in the cash flow statement. In 2018, all lease payments wereincluded in the cash flow from operations.

As at 31 December 2018, HEINEKEN reported total off-balancesheet commitments for leases of €2,013 million. The differencebetween the opening balance sheet impact as at 1 January 2019and the off-balance sheet commitments is primarily due todiscounting of future lease payments and low value and short-term lease commitments, which are not included in the leaseliability. Refer to the table below for the reconciliation:

In millions of €Operating lease commitments disclosed at 31 December 2018 2,013Impact of discounting using the incremental borrowing rate as at 1 January2019 (615)

Short-term leases not recognised as a liability (36)Low value leases not recognised as a liability (116)Other reconciling items 6Lease liability recognised as at 1 January 2019 1,252

Payments relating to contingent liabilities (IAS 37) Following the IFRS Interpretations Committee agenda decision inJanuary 2019 regarding tax deposits (relating to taxes other thanincome tax), HEINEKEN has changed its accounting policy withregards to payments relating to contingent liabilities.

Payments relating to contingent liabilities are now, in accordancewith the conceptual framework, recognised as an asset on thebalance sheet when it is probable (>50%) that HEINEKEN willrecover the payment. Previously, these payments were contingentassets under IAS 37, and recognised if the recovery was virtuallycertain (>95%). Judgement is applied for estimating the likelihood,determining the timing of potential cash inflows and therecoverability.

This change in accounting policy has been recognisedretrospectively and increased equity as at 1 January 2018 by €157million. The impact on 2018 profit amounts to €10 million(increase). The cash flow statement has been restated within thecash flow from operations.

The restated amounts in the balance sheet as at 31 December2018 are as follows:

As at 31 December (In millions of €)2018

ReportedChange in

accounting policy2018

Restated

Deferred tax assets 622 4 626Other non-current assets 1,084 136 1,220Trade and other receivables 3,740 55 3,795

Total assets 41,956 195 42,151

Shareholders' equity 14,358 167 14,525Non-controlling interests 1,182 1 1,183Provisions (non-current) 846 (13) 833Deferred tax liabilities 1,370 61 1,431Current tax liabilities 266 (21) 245

Total equity and liabilities 41,956 195 42,151

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GLOSSARYAcquisition-related intangible assets Acquisition-related intangible assets are assets that HEINEKEN onlyrecognises as part of a purchase price allocation following anacquisition. This includes, among others, brands, customer-relatedand certain contract-based intangibles.

Beia Before exceptional items and amortisation of acquisition-relatedintangible assets.

Cash conversion ratio Free operating cash flow/net profit (beia) before deduction of non-controlling interests.

Cash flow (used in)/from operational investing activities This represents the total of cash flow from sale and purchase ofProperty, plant and equipment and Intangible assets, proceeds andreceipts of Loans to customers and Other investments.

Consolidation changes Changes as a result of acquisitions and disposals.

Depletions Sales by distributors to the retail trade.

Dividend payout Proposed dividend as percentage of net profit (beia).

Earnings per share (EPS) Basic Net profit divided by the weighted average number of shares –basic – during the year. Diluted Net profit divided by the weighted average number of shares –diluted – during the year.

EBITDA Earnings before interest, taxes, net finance expenses, depreciationand amortisation. EBITDA includes HEINEKEN’s share in net profitof joint ventures and associates.

Effective tax rate Income tax expense expressed as a percentage of the profit beforeincome tax, adjusted for share of profit of associates and jointventures.

Eia Exceptional items and amortisation of acquisition-relatedintangible assets.

Exceptional items Items of income and expense of such size, nature or incidence,that in the view of management their disclosure is relevant toexplain the performance of HEINEKEN for the period.

Free operating cash flow This represents the total of cash flow from operating activities andcash flow from operational investing activities.

Group net revenue (beia) Consolidated net revenue (beia) plus attributable share of netrevenue (beia) from joint ventures and associates.

Group operating profit (beia) Consolidated operating profit (beia) plus attributable share ofoperating profit (beia) from joint ventures and associates,excluding Head Office and eliminations.

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Net debt Non-current and current interest bearing borrowings (incl. leaseliabilities), bank overdrafts and market value of cross-currencyinterest rate swaps less cash and cash equivalents.

Net profit Profit after deduction of non-controlling interests (profitattributable to shareholders' of the Company).

Net revenue Revenue as defined in IFRS 15 (after discounts) minus the excisetax expense for those countries where the excise is borne byHEINEKEN.

Net revenue per hectolitre Net revenue divided by total consolidated volume.

Organic growth Growth excluding the effect of foreign currency translationaleffects, consolidation changes, exceptional items and amortisationof acquisition-related intangible assets.

Organic volume growth Growth in volume, excluding the effect of consolidation changes.

Price mix on a constant geographic basis Refers to the different components that influence net revenue perhectolitre, namely the changes in the absolute price of eachindividual sku and their weight in the portfolio. The weight of thecountries in the total revenue in the base year is kept constant.

Profit Total profit of HEINEKEN before deduction of non-controllinginterests.

® All brand names mentioned in this report, including those brandnames not marked by an ®, represent registered trademarks andare legally protected.

Region A region is defined as HEINEKEN’s managerial classification ofcountries into geographical units.

Volume Brand specific volume (Heineken® volume, Amstel® volume, etc.) Brand volume produced and sold by consolidated companies plus100% of brand volume sold under licence agreements by jointventures, associates and third parties. Beer volume Beer volume produced and sold by consolidated companies. Non-beer volume Cider, soft drinks and other non-beer volume produced and soldby consolidated companies. Third party products volume Volume of third party products (beer and non-beer) resold byconsolidated companies. Total consolidated volume The sum of beer volume, non-beer volume and third partyproducts volume. Licensed volume 100% of volume from HEINEKEN's beer brands sold under licenceagreements by joint ventures, associates and third parties. Group beer volume The sum of beer volume, licensed beer volume and attributableshare of beer volume from joint ventures and associates.

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Weighted average number of shares Basic Weighted average number of outstanding shares. Diluted Weighted average number of outstanding shares and the weightedaverage number of shares that would be issued on conversion ofthe dilutive potential shares into shares as a result of HEINEKEN'sshare-based payment plans.

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heineken n.v. reports 2019 full year results · heineken® brand growth accelerated to 8.3%, with...

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