Budweiser Brewer Issues Profit Warning, Sending Shares Sharply Lower -- Update
October 25 2019 - 5:02AM
Dow Jones News
By Saabira Chaudhuri
Anheuser-Busch InBev SA warned its full-year results would be
weaker than expected after slowing sales growth in the U.S. and
efforts to woo drinkers overseas hurt revenue in the third
quarter.
The weak results and downbeat outlook sent shares down more than
10% in early trading, underscoring that the Budweiser brewer still
faces big challenges despite recent moves to trim its enormous debt
pile.
The world's biggest brewer has for years grappled with declining
volumes in the U.S. -- its largest market -- as Americans abandon
mainstream lagers like Bud and Bud Light in favor of craft beers,
spirits or nonalcoholic drinks. In response, AB InBev has tried to
sell pricier beers in developed markets, while pushing deeper into
emerging markets with cheaper drinks.
But its effort to attract new drinkers in markets like Brazil
and Colombia limited sales in the third quarter and is expected to
hurt full-year figures.
AB InBev said revenue per hectoliter grew 3% in the quarter,
compared with 4.2% a year earlier. For the full year, it said
growth by that measure would be slightly below inflation, having
previously expected growth above inflation. It also warned of
"moderate" rather than "strong" growth in earnings before interest,
taxes, depreciation and amortization.
For the third quarter, the Belgian company reported a profit of
$3 billion, up from $959 million in the year-earlier period. On an
underlying basis -- stripping out gains tied to hedging and the
impact of hyperinflation -- profit dropped to $1.87 billion from
$2.19 billion.
Revenue rose to $13.17 billion from $12.92 billion. Overall
volumes of nonalcoholic and alcoholic drinks edged down 0.5%
globally, missing analyst estimates for growth of 0.8%. Organic
revenue grew 2.7%, missing estimates for 4.7%.
The company blamed lower sales in China and South Korea, higher
commodity costs and foreign-exchange headwinds for the weaker
earnings. It said price increases in Brazil also resulted in lower
demand.
AB InBev has been working to reduce its debt, amassed after a
string of acquisitions including its landmark purchase of
SABMiller. It recently agreed to sell its Australia business and
listed its 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,
one year earlier than it previously expected.
The SABMiller deal was a key part of the company's strategy to
expand in emerging markets as volumes slow in the West.
AB InBev described its affordability strategy for emerging
markets 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 company -- which makes one out of every four beers
world-wide -- has also bought craft brewers, and pushed pricier
brands and nonalcoholic drinks. It said Friday those efforts were
working, with revenue globally rising even as beer volumes fell
0.9%.
Volumes again dropped in the U.S., where AB InBev lost 0.85
percentage point of market share in the quarter. The rising
popularity of hard seltzerhurt the company, which is still
developing its portfolio of low or no-sugar hard seltzer brands. On
Thursday, the company said it plans to launch a new hard seltzer
brand, Bud Light seltzer.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
October 25, 2019 04:47 ET (08:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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