Disappointing third-quarter results resulted in the Anheuser-Busch InBev (AB InBev) share losing almost 2% on the New York Stock Exchange before the close on Thursday. The weak rand cushioned the fall in the local market and by the close of trading the share was down just 0.65% to R1,692.66.
The largest beer group in the world reported a 1.2% fall in beer volumes to 161-million hectolitres in the third quarter to end-September 2017. Shareholders will take some comfort from management’s announcement that cost savings from the SABMiller acquisition will be $400m higher than the originally estimated $2.8bn. The $3.2bn savings will be delivered within the same four-year period, which is by October 2020.
“These incremental synergies will be derived predominantly from best practice sharing and procurement/engineering savings,” said management. An analyst estimated the additional savings were equivalent to a 2% boost to earnings per share. The third-quarter results highlight management’s strategy of focusing on price increases and cost savings rather than volume growth to boost bottom-line performance.
The group performed reasonably well in most markets outside the US, which is its most important profit pool. Sales in that market were down 5.6%, partly due to the hurricanes in Texas and Florida but also due to weak demand for the group’s iconic brands Bud Lite and Bud. Overall market share was down 80 basis points. Bud Lite remains by far the biggest selling beer brand in the US but its share has dipped from 18% in 2013 to below 16% currently.
In SA, beer volumes fell 2.5% after price hikes early in the year. The price hikes saw revenue per hectolitre up 6.6% and beer revenue rise 3.9% in the third quarter.
Castle Lite achieved double-digit volume growth as the brand is focused on growing in-home consumption occasions heading into the summer
season. “Flying Fish also continues to perform extremely well,” said management.
Strong top-line growth combined with cost savings resulted in earnings before interest, tax, depreciation and amortisation increasing 30.7% in SA. Margins increased an impressive 645 basis points.
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