Anheuser-Busch Shares Drop 10% After Updated Guidance

Matty-Sways

Anheuser-Busch cut its full-year guidance after a disappointing quarterly performance in the U.S. and China.

Anheuser-Busch, the world’s biggest brewer, has been losing market share in the U.S. A trend for Americans to move away from mainstream lagers like Bud and Bud Light in favor of craft beers, spirits and nonalcoholic drinks. AB InBev makes 1 of every 4 beers globally and owns brands such as Stella Artois and Beck’s in addition to Bud and its line. Sales growth has continued to slow in the U.S., while sales in China fell. Demand was also lower in Brazil and South Korea as the company raised prices to offset higher costs.

Volumes dropped in the U.S., where AB InBev lost 0.85 percentage point of market share in the quarter. Overall, organic revenue grew 2.7% for the quarter, missing analysts’ estimates of 4.7%. Underlying profit dropped to $1.87 billion from $2.19 billion. Net profit was $3 billion, up from $959 million. Revenue rose to $13.17 billion from $12.92 billion. The company blamed its weaker quarterly earnings on higher commodity costs and marketing expenses as well as foreign-exchange headwinds, and said the issues would also hurt its full-year figures.

It now expects “moderate” rather than “strong” growth in earnings before interest, taxes, depreciation and amortization for the full year.

AB InBev has been working to reduce its debt after a series of acquisitions including SABMiller. It agreed to sell its Australia business and Asia arm. On Friday, it said it was on track to hit a net-debt-to-Ebitda ratio of below four times by the end of 2019, a year earlier than it previously expected.

The company described the affordability strategy as “a vital component to reaching new consumers and introducing beer to new occasions.” In Colombia, the company has been selling more one-liter beer bottles, in Brazil it is selling brands made with ingredients grown by local farmers, and in Ecuador it launched a new one-liter returnable glass bottle to keep prices down.

The rising popularity of hard seltzer hurt the company, but the company plans to soon launch a new hard seltzer brand, Bud Light seltzer.

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