Finance

Student names: Daan Hilderink, Valerie Schuttenbeld, Isa Wanink, Nienke Osinga
Group 5 CHP-E

For our finance assignment we compared the companies Heineken and AB-InBev. In this document
you will see a trend, horizontal and vertical analysis. It also concerns the ratios.

1) Trend analysis

year 2015 2016 2017 2018 2019 2020

Heineken revenue 20,511 20,792 25,843 26,811 28,521 23,777
AB-InBev revenue 43,604 45,517 56,444 54,619 52,329 46,881

year 2015 2016 2017 2018 2019 2020

Heineken index 100 101,4 126 130,7 139,1 115,9
AB-InBev index 100 104,4 129,5 125,3 120 107,5

Year 2015 2016 2017 2018 2019 2020

Heineken % 0 1,37% 24,29% 3,75% 6,38% -16,63%
AB-InBev % 0 4,60% 24% -3,23% -4,19% -10,41%

For the trend analysis, we looked at the period 2015-2020. From 2016 to 2017 you see a substantial
increase in the Revenue of both companies. Heineken, for example, bought Lagunitas during this
period to be able to reach the American market more. Both companies can also make use of the tax
benefits that have applied in the United States since then. AB-InBev has also bought a company
between 2016 and 2017 that makes organic energy drinks and is trying to focus more on the African
market. They also sold more expensive specialty beers, which automatically increased profits. In
2018, you can already see a decrease in revenue at both companies. We cannot explain this in any
other way than that less alcohol was consumed. After that, the corona period will start from 2019,
here you can see that a decrease is started. This is of course because the restaurants had fewer
guests or were even completely closed. There were also no or few festivals. Drinks are even taken
back, and attempts are made to make disinfectant out of it. The decline will continue in 2020.
Extraordinarily little was possible, and these companies notice that.

We calculated this by looking up the revenue in the annual statements of both companies. We have
put this in a table, and we started calculating with this. 2015 is the 'base' year, with index figures this
is shown by 100. Then we calculated how much the increase was compared to the base year. So, you
see that both companies continue to make profits compared to the base year, but because they earn
less in 2020 than in 2017, they are making a loss. For example, with index figures you can see that
they still have more revenue than in 2015.

If you calculate it as a percentage, you compare each year with the year before. 2015 is again the
base year here. This year will therefore receive 0%. In the following years you can see whether
revenue has come in. this gives a completely different picture than the index figures, as it now
becomes clear how much both companies have lost in the last 2 years.

2) Vertical analysis

A vertical analysis consists of a display of standard rubrics displayed as a percentage of that rubric. In
a vertical analysis, both the assets and liabilities of a balance sheet are equated at 100%
Heineken 2020 2019
Absolute Relative Absolute Relative
Revenue 23770 X 28521 X
Excise tax expense 4055 17,06 4552 15,96
Other income 56 0,24 95 0,33
Raw materials, consumables, and 12450 52,38 14592 51,16
services
Personnel expenses 3669 15,44 3880 13,60
Amortisation, depreciation, and 2874 12,10 1959 6,89
impairments
Total other expenses 18993 79,90 20431 71,63
Operating profit 778 3,27 3633 12,74
Interest income 50 0,21 75 0,26
Interest expenses 497 2,09 529 1,85
Other net finance expenses 143 0,60 59 0,21
Net finance expenses 590 2,48 513 1,80
Share of profit of associates and 31 0,13 164 0,58
joint ventures
Profit before income tax 157 0,66 3284 11,51
Income tax expense 245 1,03 910 3,19
Profit/loss 88 0,37 2374 8,32

InBev 2020 2019

 Absolute Relative Absolute Relative
Revenue 46881 X 52329 X
Cost of sales 19634 42,00 20362 39,00
Gross profit 27247 58,00 31967 61,00
SG&A 15368 33,00 16421 31,00
Other operating income/(expenses) 845 2,00 875 2,00
Normalized profit from operations 12723 27,00 16421 31,00
Non-recurring items 3103 7,00 323 1,00
Profit from operations 9620 21,00 16098 31,00
Depreciation, amortization, and 4598 10,00 4657 9,00
impairment
Non-recurring impairment 2733 6,00 X 0,00
Normalized EBITDA 17321 37,00 21078 40,00
EBITDA 16951 36,00 20755 40,00

We took the total revenue as the 100%. Then we looked at the balance sheets of both companies
and made a vertical analysis. we looked at the years 2019 and 2020. Total revenue was 100%, so we
had to calculate how much percentage the rest was in comparison with the total revenue.

The formula we used to calculate the percentages is:

(value/total value) x 100%

As you can see in the analysis is that the total revenue in 2019 for both companies are higher than in
2020. What you can conclude from that is that they both had a better year in 2019. And so, you can
compare everything with vertical analysis.

3) Horizontal analysis

We calculated the relative differences by doing (new-old) / old x 100%.

Income statement Heineken

As you can see, the difference from 2018-2019 is all positive, meaning Heineken has improved. They
have made 6% more profit and especially in ‘operating profit’, ‘other income’ and ‘amortization’ they
have increased. If you look at 2019-2020, you can see that they have decreased in almost everything
compared to 2018-2019. This is of course due to the corona crisis. Restaurants and bars had to close
and that is where a large part of Heineken's turnover comes from. The main point is that the 'other
net finance income' has increased enormously. Even above the level it was in 2018.

Balance sheet Heineken

If we look at the 2018-2019 balance sheet of Heineken, you said that the 'reserves from own shares'
has fallen sharply and the 'trade and other payables' has risen sharply, which in this case means that
it has come about so that we incurred more debt that year.

If we then take look at 2019-2020, we mainly see that the reserves have fallen sharply, which can be
traced back to the corona crisis. However, it is striking that the 'total current assets' has increased
dramatically.

Income statement AB-InBev

If

you look at AB-InBev's income statement, you will not see excessively substantial changes in 2018-
2019. It is not that good compared to Heineken's, but there have been no major differences, but if
you compare 2018-2019 next to 2019-2020, there are certainly differences. In 2019-2020, almost
everything fell, which of course had to do with the corona crisis. But if you compare 2019-2020
 between the two companies, you can see that Heineken has had a much bigger decline than AB-
InBev.

Balance sheet AB-InBev

in millions 2018 2019 absolute difference relarive difference 2019 2020 absolute difference relative difference
intangible assets 597 586 -11 -1,84 586 528 -58 -9,89%
property, plant and equipment 39 58 19 48,72% 58 97 39 67,24%
financial assets 115156 117894 2738 2,38% 117894 115712 -2182 -1,85%
current assets 38067 26224 -11843 -31,11% 26224 18937 -7287 -27,79%
total assets 153858 144762 -9096 -5,91% 144762 135274 -9488 -6,55%

issued capital 1239 1239 0 0% 1239 1239 0 0%

share premium 13186 13186 0 0% 13186 13186 0 0%
lagal reserve 124 124 0 0% 124 124 0 0%
reserves not available for distribution 3595 4386 791 22% 4386 3454 -932 -21,25%
reserves availible for distribution 33009 33009 0 0% 33009 33009 0 0%
profit carried forward 12607 19661 7054 55,95% 19661 19691 30 0,15%

provisions and deferred taxes 46 42 -4 -8,70% 42 100 58 138,10%

non-current liabilities 63758 53257 -10501 -16,47% 53257 45486 -7771 -14,59%
current liabilities 26293 19858 -6435 24,47% 19858 18985 -873 -4,39%
total equity and liabilities 153858 144762 -9096 -5,91% 144762 135274 -9488 -6,55%

The first thing that strikes me is that three points on the sheet have not changed from 2018 to 2020,
they have remained the same. The biggest change is that of the provisions and deferred taxes which
have increased by 138% from 2019 to 2020.

If you compare AB-InBev's balance sheet with Heineken's, you can see that Heineken's is, much more
extensive, but also that Heineken has gone through much more change.

4) Ratio’s

To calculate the ratios of Heineken and AB-InBev we used three formulas.

- Gross profit margin
- Operating profit margin
- Net income margin

Gross profit margin

To calculate the cross-profit margin I used a formula, namely:
Gross profit margin = Revenue-(cost of Godsell/net revenue) x100
From this we can conclude that AB-InBev has outperformed Heineken in both years. Heineken has
risen in 2019. AB-InBev has remained constant over these two years.

Operating profit margin

To calculate the operating profit margin I used a formula, namely:
Operating profit margin = (operating profit/net revenue) x100

From this we could conclude that AB-InBev has done better than Heineken. Heineken fell sharply in
2019. At AB-InBev you see a small increase.
Net income margin
To calculate the net income margin, we used the last formula:
Net income margin = (net income/revenue) x100

From this I can conclude that Heineken is doing better with net income. They also increased in this
respect from 2018. AB-InBev did not increase or do much in 2019.