The light at the end of the tunnel
A-B InBev is to move ahead with at least USD 7 billion in asset disposals and cut costs more quickly than expected as it tries to de-leverage its balance sheet, which carries USD 56.5 billion (EUR 45 billion) in debt.
A-B InBev also plans to cut another USD 500 million from U.S. operations this year but that doesn’t mean any more job cuts in addition to the more than 2,000 announced in December.
Upon releasing its full year results on 5 March, the brewer said that synergies from the acquisition would be higher than expected, reaching USD 2.25 billion instead of the USD 1.5 billion originally expected.
A-B InBev also announced that Carlos Brito, its chief executive, and most of its top management would not receive bonuses this year because they missed their financial targets in 2008. Yet, the company declined to specify what the targets were.
The brewer of Stella Artois, Beck’s and now Budweiser did not comment on its asset disposals. Although it only needs to raise USD 2.8 billion in cash in the short term to pay down the remainder of a bridging loan by November, it reiterated that it would dispose of at least USD 7 billion in assets.
It has already sold a 20 percent stake in Chinese brewer Tsingtao to Japan’s Asahi this year, raising USD 667 million, and raised USD 100 million from selling the U.S. brewing and distribution business of Labatt, its Canadian beer brand to comply with the monopoly watchdog’s commands.
The group has started a sale process for other assets, including its Oriental brewery in South Korea, which could raise between USD 1 billion and USD 1.5 billion.
Other likely disposals include its American theme park business and its German beer business. Analysts say that a sale of its Russian beer business is also possible. The company lost 0.8 of a percentage point of market share in Russia last year, while its sales volumes in the country fell 12.4 percent over the year.
Another candidate to be put up for sale could be the Czech beer business Staropramen.
A-B InBev reported that total beverage volumes in 2008 were flat, with beer volumes down 0.3 percent. However, soft drinks delivered volume growth of 4.9 percent.
On the operational side, A-B InBev achieved EBITDA growth of 4.6 percent while their EBITDA margin decreased 15 basis points, closing the year at 33.1 percent.
Since InBev’s creation in 2004, the EBITDA margin has increased from 24.7 percent in 2004 to 33.1 percent in 2008.
In North America, which will be the biggest regional contributor to A-B InBev’s profits from 2010, full-year sales volumes rose 3.1 percent, and fourth-quarter volumes were up 4.1 percent.
Before the end of this year A-B InBev will open a New York office because more than 40 percent of the newly combined company’s earnings are now generated in the U.S.
The group’s global headquarters are to remain in Belgium, though.
