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AB InBev's sales exceed pre-pandemic levels but profit underwhelms

AB InBev Q2 profit beats expectations
AB InBev Q2 profit beats expectations   -   Copyright  Thomson Reuters 2021
By Reuters

By Philip Blenkinsop

BRUSSELS -Anheuser-Busch InBev underwhelmed on second-quarter profit on Thursday as costs increased even though the world’s largest brewer drove revenues to above pre-pandemic levels.

The brewer reported lower core profits in its two biggest markets, the United States and Brazil, as cans and distribution became more expensive and a weaker Brazilian real bit.

AB InBev retained its forecast that earnings before interest, tax, depreciation and amortisation (EBITDA) would grow by between 8% and 12% this year, with revenue increasing at a faster pace.

In the second quarter, that profit figure rose 31% on a like-for-like basis to $4.85 billion, against expectations for a 35% increase, according to a company-compiled poll.

Analysts at Citi said core profit missed estimates, and the lack of upgrade to the forecast was another negative.

AB InBev shares were down 6.0% at 54.62 euros at 1100 GMT, placing them among the weakest performers in the FTSEurofirst300 index of leading European shares and meaning they are now also lower in the year to date.

The company said its outlook reflected its current assessment of the scale and magnitude of the pandemic and could be subject to change.

CANCHALLENGE

In a clear sign that the pandemic and related restrictions are not over, South Africa instituted a new alcohol sales ban for four weeks from late June and ongoing curbs in South Korea led to lower beer sales there.

The pandemic has also led to a surge in demand for cans, pushing up their price, given restrictions on bars, where bottles and kegs are the norm.

“We had to import a lot of cans from several different markets, cans from Mexico, cans from China, cans from Europe and India in order to serve the high demand,” chief executive Michel Doukeris told Reuters in a telephone interview, referring to the U.S. market.

Transportation costs have also increased, both due to higher prices and distance travelled. In Brazil, returnable bottles used in bars are closer at hand, available in every brewery, while cans have further to travel.

Doukeris, the former North America zone head who took over as chief executive from fellow Brazilian Carlos Brito on July 1, said revenue in the April-June period was 3.2% higher than in the same period of 2019.

A year on from its worst quarter of the COVID-19 crisis, the brewer of Budweiser, Stella Artois and Corona did benefit from increased beer consumption across the Americas, in Europe and South Africa, including a leap of more than 50% in Colombia.

Only in China, which moved out of its coronavirus lockdown earlier in 2020, were beer volumes lower.

The world’s second largest brewer, Heineken, reports its first-half results on Monday, with global number three Carlsberg on Aug. 18.