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InBev cheers profits as beer sales growth fizzes to five-year high
ANHEUSER-BUSCH InBev, the world's largest brewer, beat earnings expectations after beer sales grew at their fastest pace in over five years, helped by increases in Latin America, Europe and Africa and a later Easter.
The maker of Budweiser, Corona and Stella Artois said on Thursday that beer volumes rose by 2.1 per cent year-on-year in the April-June period, a rate unmatched for five years and meeting its strategy to focus much more on the top line.
Price rises and consumers shifting to higher-priced beers saw revenue and profits increase by even more.
AB InBev shares were up 4.3 per cent at 90.06 euros (S$137) at 0805 GMT, making them among the strongest performers in the FTSEurofirst index of leading European stocks.
They have now gained almost 14 per cent in the past week although are still some 11 per cent down year-on-year.
Bernstein Securities' analyst Trevor Stirling said that the results were strong, highlighting exceptional volume increases in Mexico and Australia and adding that a 5 per cent beat of market expectations would lead to increases of full-year estimates.
The Belgium-based brewer said that a number of its markets benefited from the later timing of Easter this year, pushing more beer sales into the second quarter from the first. However, unlike 2018, it did not get a boost from sales linked to the soccer World Cup.
Volumes, it said, rose in Mexico, Brazil, Europe, South Africa, Nigeria, Australia and Colombia. The United States, its largest market, was an exception as it brought forward price hikes to April from October, hitting volumes and market share.
AB InBev said that it continued to expect strong revenue and core profit growth this year ,and that revenue per hectolitre would be ahead of inflation.
In most major markets, sales and margins expanded. However, in Brazil, its number two market, aluminium and barley costs and the devaluation of the real currency also cut into profit.
In South Africa, a market that it recently entered, volumes rose but earnings fell as the company spent more to grow its global brands and paid for commodity and currency hedges.
AB InBev remains burdened by debt after its 2016 takeover of nearest rival SABMiller, and has made deleveraging a priority.
However, it had to shelve a planned flotation of a stake in its Asian operations, only to follow that up a week later with the sale of its Australia business to Japan's Asahi for US$11.3 billion.
Chief financial officer Felipe Dutra said that AB InBev still believed in the merits of its Asian initial public offering (IPO) - that it would create a local champion to drive regional consolidation - but would only consider it at the right valuation. "The past two weeks confirm we remain disciplined," he told a conference call. "We retain the potential IPO as an option and we will continue to monitor the markets . . . but there is no assurance that an IPO will ever materialise."
The company said that its net debt was US$104.2 billion at the end of June, unchanged from the close of 2018, and its net debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio dipped to 4.58 from 4.61.
It aims to bring this ratio down to below four by the end of 2020. Its ultimate goal is a multiple of around two. Mr Dutra said that the Australia business sale, due to close early next year, would reduce the multiple by 0.35 percentage points.
For the second quarter, Ebitda rose by 9.4 per cent on a like-for-like basis to US$5.86 billion, compared with the US$5.73 billion average of analyst forecasts based on Refinitiv data. REUTERS