Heineken the world's second-largest brewer, reported an increase in third-quarter beer sales on Wednesday, with growth in all regions except Europe, where poor summer weather reduced demand, and in the United States.
Sales in the July-Sept period rose 2.5 percent excluding the impact of acquisitions to 60.0 million hectolitres, a little ahead of the average 57.9 million average expectation in a Reuters poll. The share price was down 2.2 percent at 83 euros at 0905 GMT, making the shares one of the weakest performers in Europe's FTSEurofirst index.
Analysts said the weakness in Europe and a sharper than predicted impact from changes in foreign currency exchange rates were behind the fall.
Heineken has already warned of a negative translational impact from foreign exchange rates, but estimated on Wednesday that for the full year it would be 75 million euros at net profit level, against the 60 million euro figure it gave in July.
The Dutch brewer, the top seller in Europe, said very strong growth in Asia Pacific, outside China, led to a 12.2 percent increase in beer volumes, while strength in South Africa, Ethiopia and Russia led to an 8.8 percent rise in sales to Africa, the Middle East and Eastern Europe. Growth in the Americas was more muted, as lower sales in the United States partly offset growth in Mexico and Brazil, where Heineken acquired Kirin's business earlier this year.
In Europe, sales were down due to a cooler summer in France and the Netherlands as well as weakness in Poland and Britain, where supermarket Tesco has pulled some Heineken brands from its shelves over planned price increases.
The company said it retained its full year expectations that revenue and profit would grow and that its operating margin would increase by about 40 basis points, excluding acquisitions concluded this year.
The company reported a net profit of 1.49 billion euros ($1.75 billion) for the first nine months, 1 percent higher than a year earlier when an impairment taken last year for the Democratic Republic of Congo is taken into account.
Saudi Arabia has unveiled plans to build a new city and business zone - a project that will be backed up by more than $500bn (£381bn) in investment. Crown Prince Mohammed bin Salman says the 26,500 sq km (10,232 sq mile) NEOM zone will be developed in the north-west, extending to Egypt and Jordan.
It will focus on nine sectors including food technology and, energy and water. The crown prince has been leading a drive to move Saudi Arabia away from its dependence on oil revenues. In August, the Gulf kingdom launched a massive tourism development project to turn 50 islands and other sites on the Red Sea into luxury resorts. However, the extremely ambitious nature of Mohammed bin Salman's vision is sure to raise questions about how realistic it is, the BBC's economics correspondent Andrew Walker says.
Saudi officials said NEOM would be financed "over the coming years" by the state as well as local and international investors. "NEOM's contribution to the kingdom's GDP is projected to reach at least $100bn by 2030, in addition to its per capita GDP - projected to become the highest in the world," a statement said.
"It is set to become a new vibrant destination" on the coast of the Red Sea and the Gulf of Aqaba, linking Asia, Africa and Europe.The announcement came at an international business conference in Saudi Arabia's capital Riyadh.
Egypt and Jordan are yet to comment on the new project.
The Kenyan government recently made three policy announcements that are of great importance to maize farmers and consumers. The first was that a subsidy introduced in May 2017 to reduce consumer prices would be discontinued. Before the subsidy, prices had soared to an all-time high on the back of dwindling supplies.
The second announcement was a significant increase in the government’s budget allocation to buy maize from farmers. The third was an increase in the subsidy for fertiliser.
Earlier this year, poor domestic supply caused prices to shoot up. The government decided to allow imported maize to come in. But instead of allowing market prices to prevail, it subsidised the imports to make consumer prices cheaper, essentially subsidising consumers as well as farmers. The food subsidy reduced the price of a 2kg packet of maize flour from 140 Kenya shillings to 90, a subsidy of approximately 35%.
In ending the subsidy of imported maize, the government aims to ensure that grain millers purchase locally produced maize harvested since August 2017. The government has also signalled that it aims to purchase the entire harvest offered for sale by farmers for the strategic food reserve by allocating USD$60 million.
Increasing the subsidy for fertiliser will reduce the input costs for farmers and increase maize yields. But the overall success of these policies is likely to be mixed, especially in the short term.
The three interventions
By the time the maize subsidy was introduced in May 2017, the price for a 90kg bag of locally produced maize was about 4,500 Kenyan shillings, compared to world market prices of 1,400 Kenyan Shillings. This huge price difference is attributed to high input costs, resulting in low productivity and therefore high per unit costs.
The subsidy stabilised local consumer maize prices. But it came at a huge cost to the government, which paid out USD$67 million (6.7 billion Kenyan shillings) between May and October 2017.
Once the subsidy ends, consumer prices are expected to increase by approximately 15% based on simulations done by Tegemeo Institute, the policy research institute of Egerton University.
Adding to the upward pressure on prices is the increase in the money the government is making available to buy maize stocks. It usually buys maize at a price higher than the market price. This has the effect of raising the market price – and undermining the objective of reducing consumer prices.
Ideally, government should intervene on either the supply side or the demand side, but not both. For example, it could intervene to keep the costs of production as low as possible so that consumers would buy food at market prices. Alternatively, it could allow producers to sell at market prices and subsidise consumers who cannot afford these prices. The consumer subsidy model has been used by India and Egypt, where households are given a cash transfer to purchase food.
It has been argued that in the Kenyan model farmers enjoy a double subsidy. They get subsidised inputs and above-market prices from government. This forces millers to offer even more attractive prices to compete with government for farmers’ maize stocks. This puts inflationary pressure on consumer prices.
The USD$60 million allocated to replenish the grain reserve is significant given that for the current year the government had allocated USD$18 million (increasing the allocation by more than 400%). But it won’t mop up the current harvest. Government will buy a quantity determined by the price it offers farmers. Maize farmers have a strong lobby which has influenced the price. A high price means less is purchased. Purchasing less quantities effectively leaves the government unable to affect the price of grain by increasing supply when it falls short, a key objective of the strategic food reserve.
The government has announced that it will buy maize from farmers at Ksh.3,200 per 90kg bag. At this price, the government will buy 1.8 million bags, or only 6% of the current harvest. Monthly consumption is 3.3 million bags. The recommended quantity is three months cover. A three months cover allows the government to increase supply during when it falls short and thereby stabilise prices, while allowing time to source for more grain.
And the country will still have to import maize because it isn’t producing enough. Tegemeo Institute, assessing the food situation for maize and rice production in 2017, estimates that the maize harvest will be about 20% lower than this year. Erratic rain and an army worm infestation are the main reasons.
Usually, millers are forced to offer a price higher than the government price to purchase enough quantities for milling. For example, when the government buys maize at 3,200 shillings per bag, millers will buy at 3,400 shillings, which is 6% higher. Without the subsidy that guaranteed consumers a lower price, for which millers were guaranteed a subsidised price of 2,300 shillings, it is expected that millers will pass on much of the increase in maize prices to consumers. This will amount to 40% if they buy at Sh3,200 or 48% if they buy at Sh3,400. Therefore, to keep the consumer price unchanged, government may be forced to subsidise consumer prices or offer a rebate to millers.
The third move by the government was to lower the cost of fertiliser, offered through government subsidy.
Farmers will welcome the move. Research by Tegemeo Institute found that fertiliser accounted for about 15% of the cost of production in 2017. But, as has been shown before, there is a need to investigate how the subsidy increase will affect private-sector fertiliser markets.
To maintain stable production and prices, the government should focus on long-term interventions that will improve productivity and lower the production costs per unit. It needs to plan better. For example, it must plan now for imports to meet the expected shortfall.
When short-term intervention in the markets is required, it should be strategic and with a clear exit strategy. Such a response should be limited to managing shocks such as pest infestation and disease outbreaks. Currently, short term interventions seem to the only response, leading to the same challenges being repeated.
The Nigerian Communications Commission (NCC) announced that subscribers browsing the internet through its network increased to 93 million in September from 92.1 million the previous month.
The telecommunications industry regulator made the disclosure in its monthly internet subscribers’ data on its website. The commission said the data showed a marginal increase of 815,764 subscribers during the period.
It said that the data reflected internet users on both the Global System for Mobile (GSM) communications and the Code Division Multiple Access (CDMA) networks. The regulator said that 92.97 million out of the 93 million internet users in September were on GSM network while 30,309 users were on the CDMA network.
The data showed that MTN had 32.5 million subscribers, browsing its network in the month under review as against 32.1 million in August, indicating an increase of 359,409 internet subscribers. According to NCC, Globacom has 26.942 million customers, surfing its network in September, revealing a decrease of 12,405 users from the 26.955 million that surfed the network in August.
Airtel had 21.76 million internet users in September, showing an increase of 600,400 customers from the 21.16 million recorded in August.
The data also showed that 9mobile had 11.71 million customers, who browsed in September, indicating a decrease of 131,640 users from the 11.84 million users in August.
For CDMA operators, Visafone had 30,305 customers surfing its internet in September while Multi-Links had only four internet users. Both operators had a total of 30,309 users in September, the same figure recorded by the two operators in August.