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AB InBev Forecasts 'Materially Worse' Second Quarter

Published on May 11 2020 11:21 AM in Drinks tagged: Trending Posts / AB Inbev / Anheuser-Busch InBev

AB InBev Forecasts 'Materially Worse' Second Quarter

Anheuser-Busch InBev (AB InBev), the world's largest beer maker, has forecast a "materially worse" second quarter as coronavirus restrictions curb drinking across the globe, although it said that China is showing early signs of recovery.

The brewer of Budweiser, Corona and Stella Artois sold 9.3% less beer and other drink than a year ago in the first three months of 2020, but this decline worsened to approximately a third in April as bars and restaurants closed and some production halted.

At one extreme, South Africa banned sales of alcohol at the end of March and Peru closed down beer production and sales until the end of April, while many stores in Mexico were out of stock after breweries were shut.

The Belgium-based beer maker did say, however, that there are early signs of recovery in China and South Korea as restaurants, and to a lesser extent clubs, began reopening from mid-March.

The company's drinks volumes in China were down 46.5% in January-March, but only 17% lower in April.

AB InBev has already scrapped its guidance for 2020 due to the COVID-19 pandemic, and proposed halving its final 2019 dividend, along with taking other cost-saving measures.

It also said that regulatory approval has concluded for the A$16 billion ($10 billion) sale of its Australian operations to Japan's Asahi Group Holdings. The deal is now expected to close on June 1.

AB InBev's shares are down 45% this year.

"April trends are bad, but they could have been worse and the Australia sale, even if expected, is almost there," said Trevor Stirling, beverage analyst at Bernstein Research, adding that he is modelling a 37% volume decline for the second quarter.

From Bars To Stores And Deliveries

Overall, AB InBev's first quarter core profit (earnings before interest, tax, depreciation and amortisation, or EBITDA) came in at $3.95 billion, down 13.7% from a year earlier. That compared with a company-compiled consensus of a 14.7% drop.

In the United States, AB InBev's largest market, the company lost market share as the craze for hard seltzer - sparkling, often fruit-flavoured alcoholic beverages - accelerated, although the company is pushing more into this category.

Sales in stores also rose, disproportionately benefiting established brands such as its own and larger packs, though it is not clear if this will continue long term.

Stores across the world have seen surging sales of beer, wine and spirits, although the pace in many countries has slowed and it seems unlikely to make up the shortfall from lost sales in bars, clubs and restaurants.

In Brazil, AB InBev's second largest market, revenue fell 10% in the first three months of the year as, in March, many states forced the closure of bars and restaurants, which account for more than half of AB InBev's drinks volumes in the country.

AB InBev is hoping to expand a service delivering cold beer to customers within an hour from closed venues.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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