AB InBev Beats Earnings Expectations As Beer Sales Hit Five-Year High
Brewer Anheuser-Busch InBev has beaten earnings expectations after beer sales grew at their fastest pace in over five years, helped by sales increases in Latin America, Europe and Africa, and a later Easter.
The maker of Budweiser, Corona and Stella Artois said that beer volumes rose by 2.1% 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.
Bernstein Securities' analyst Trevor Stirling said the results were strong, highlighting exceptional volume increases in Mexico and Australia, and added that a 5% beat of market expectations would lead to increases of full-year estimates.
The Belgium-based brewer said a number of its markets benefitted 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.
AB InBev said volumes 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 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 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.
Asian IPO Still An Option, But Not Assured
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 $11.3 billion.
Chief financial officer Felipe Dutra said AB InBev still believes in the merits of its Asian 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."
Net Debt And EBITDA
The company said its net debt was $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. Dutra said that the Australia business sale, due to close early next year, will reduce the multiple by 0.35 percentage points.
For the second quarter, EBITDA rose by 9.4% on a like-for-like basis to $5.86 billion, compared with the $5.73 billion average of analyst forecasts based on Refinitiv data.