AB InBev profit takes a knock amidst sales decline

Anheuser-Busch InBev said its profits for the third quarter of 2018 fell 37.4% to $1.6bn from $2.6bn in the prior year, and declined 11.7% to $5.2bn from $5.9bn in the nine months to the end of September. The drop came amidst a 10% drop in third quarter revenue to $13.2bn and a 3.5% decrease in nine months sales to $40.4bn.

The company blamed the drop in profits on beer volume declines in Brazil and Argentina as both countries remain marred in the midst of a difficult macroeconomic environment. The firm also cites a ‘mark-to-market’ loss linked to the hedging of its share-based payment programmes for the declines.

The company cut its dividend to shareholders in half to €1.80 a share and shares in the maker of Budweiser shed as much as 11% on Thursday, its sharpest fall in a decade, before recovering some of the loss and settling at 8% down.

Total beer volumes grew 0.2% in the third quarter and 0.3% in the 9-months. Combined revenue for its global beer brands, Budweiser, Stella Artois and Corona grew 7.7% in the quarter and 8.7% in the 9-months.

The company notes that its integration with SABMiller continues to progress with synergy capture and cost savings of USD$299 million in Q3 and USD$588 million in the 9-months.

On a regional basis, the company said its African markets saw single digit and double-digit growths except for South Africa which saw mid-single digits decline. In Nigeria, beer volumes grew by double-digits as growth has further accelerated following the opening of the company’s fourth brewery in the country. Budweiser grew strongly following its launch during the 2018 FIFA World Cup in Russia, adding that the brand is well positioned to participate in the country’s increasing premiumization trend.

In South Africa, a VAT increase in April and numerous petrol price increases continue to impact negatively on consumer disposable income, with revenue declining in the mid-single digits. The firm said its beer volume fell in the country due to out-of-stock supply constraints, which are expected to normalize going into the fourth quarter high season.

Elsewhere in Africa, volumes were lower in Tanzania and Uganda, but this was more than offset by continued double-digit volume growth in Zambia and Mozambique.

In other markets outside Africa, revenues grew 1.5% in the United States in the third quarter, but declined by 1.4% in the nine months. Mexico, however, performed strongly, with single digit revenue growth in the third quarter and double-digit sales growth in the nine months, driven by strong performance of its full brand portfolio. Colombia also delivered good results with 5.2% revenue growth in the quarter and 7.9% sales growth in the nine months, driven by premiumization initiatives.

In Brazil, revenue grew 2.1% in the third quarter and 2.9% in the nine months due to price increase taken in the quarter. However, beer volume declined 3.1% and 3.4% in Q3 and nine months respectively due to difficult macroeconomic environment in the country.

China saw revenue growth of 7.4% in the third quarter and 6.3% in the nine months, helped by a 1% and 1.8% volume growth in Q3 and 9-months respectively, driven by successful brand activations over the summer and ongoing premiumization.

Western Europe grew revenue by mid-single digits, with double digit growth of its global brands led by Budweiser as it benefitted from the 2018 FIFA World Cup in Russia.

Looking out to the rest of 2018, the brewer said it expects to deliver strong revenue growth, driven by the solid performance of its brand portfolio and strong commercial plans.

Updated: 5th November 2018

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