AB InBev Sees 10% Hit To First-Quarter Profit From Coronavirus
The world's largest brewer, Anheuser-Busch InBev (AB InBev), has forecast a 10% decline in first-quarter profit after the coronavirus outbreak hit beer sales during the Chinese New Year.
The maker of Budweiser, Corona and Stella Artois said that the virus has led to a significant decline in demand in China, both at bars and drinking at home, notably during the Chinese New Year.
The outbreak, along with an expected weaker Brazilian market, could lead to a 10% drop in first-quarter core profit (EBITDA) on-year, AB InBev said, adding that it expects 2020 core profit growth of between 2% and 5%, with most expansion occurring in the second half.
The Belgium-based company, which sells more Budweiser in China than in the lager's key US market, said that the disease shaved up to $285 million off of its revenue in China in the first two months of this year.
It is the latest drinks company to warn that the outbreak is taking a toll on business, following Diageo's alert that the fast-spreading virus in greater China and the Asia Pacific region could knock up to $260 million off of its profit in 2020.
Nightlife ground to a halt in China in the third quarter last year, with many bars and restaurants shutting down due to the COVID-19 virus, AB InBev CEO Carlos Brito said, echoing comments from the world's third largest brewer, Carlsberg.
"Our business is all about going to restaurants, to nightlife, going out with friends - it's really about to go back to normal, we're preparing for the surge when things return to normal," Brito told reporters on a call.
More than half of the company's 33 Chinese breweries have reopened, with the exception of the one in the central Chinese city of Wuhan, Brito said. The virus is believed to have originated in a market in Wuhan late last year.
The company's fourth-quarter core profit declined 5.5% to $5.34 billion, which was worse than market expectations of a 1.9% drop.
"Our performance in 2019 was below our expectations, and we are not satisfied with the results," Brito said.
Profit from both key markets - the United States and Brazil - dropped after AB InBev oversupplied wholesales to the former earlier in the year, while higher costs for commodities and a weaker Brazilian real dented sales in the Latin American country.
AB InBev said that results in Brazil in the first quarter would not match the very strong figures of the first months of 2019, when an exceptionally late Carnival led to revenue growth of 16.7%.