AB InBev's shares dip as lower sales in Brazil hit core earnings

 
Courtney Goldsmith
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AB InBev's core earnings just fell for the first time ever (Source: Getty)

Anheuser-Busch InBev (AB InBev)'s shares edged down today as the firm reported its first drop in core earnings since its formation more than a decade ago due to lower than expected sales in Brazil.

The figures

The world's largest brewer said earnings before interest, tax, depreciation and amortisation (Ebitda) fell 0.1 per cent in 2016 to $16.75bn (£13.65). Excluding Brazil, the firm said Ebitda grew by 6.3 per cent over the year.

Earnings per share fell to 0.72 cents from 5.05 cents in 2015.

Revenue grew by 2.4 per cent in 2016, while total volumes declined by two per cent.

Normalised profit attributable to equity holders was $4.85bn compared with $8.51bn the previous year, due to higher net finance costs and unfavourable currency translation.

The brewing giant's Brussels-listed shares have fallen 2.7 per cent in morning trading.

Why it's interesting

Brazil is AB InBev's second-largest market, and today the maker of Budweiser, Stella Artois and Corona said its market share in the country fell over 2016 while sales declined and costs increased. In February, rival Heineken increased its presence in Brazil when it agreed to buy Japanese firm Kirin's loss-making Brazillian arm.

AB InBev completed its tie-up with British drinks behemoth SABMiller to form the world's biggest brewer in October 2016, and now it makes more than a quarter of the world's beer. The drinks maker raised its forecast for merger savings to $1.75bn from $1.4bn, excluding the $1.05bn SABMiller had already noted before the merger.

What AB InBev said

"From a top-line growth perspective, financial year 2016 was a difficult year," AB InBev said. "A challenging environment in Brazil has put pressure on the consumer and impacted our results. Many initiatives, including premiumisation and the growth of returnable glass bottles in the off trade, have been well received, but Brazil beer volumes were down, revenues suffered and costs of sales rose compared with financial year 2015 due to devaluation of the Brazilian Real."

"Our outlook in Brazil remains positive," AB InBev said, noting that the country's long-term trajectory comes with "inevitable" periods of volatility.

What analysts said

Anna Ward, alcoholic drinks analyst at Euromonitor International said:

A-B InBev’s 2016 performance has been dragged down by weakening beer volumes in its core markets, notably China and Brazil, while Mexico continues to present a rare bright spot. While the company maintains a positive outlook on the future the Brazilian beer market, competition will remain intense, particularly in the crucial premium segment. Heineken’s recent purchase of Kirin’s operations has strengthened its presence in the country and reduced the gap between it and market leader AB InBev.

AB InBev’s relatively poor annual results highlight the timeliness of the SABMiller acquisition, which broadens the company’s geographic spread and provides much needed access to the growth markets of Sub-Saharan Africa.

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