AB-InBev: the fizz is gone
Belgium | It was all about the debt. Felipe Dutra’s last public appearance as AB-InBev’s CFO was spent explaining the brewer’s debt. He reassured investors that “there is no year in which the total debt maturing exceeds our liquidity [of USD 16 billion].”
Mr Dutra reported on 27 February 2020, that last year the world’s number one brewer undertook a significant effort to further extend the maturity of its debt. “This gives us a comfortable maturity profile,” Mr Dutra said.
And true, AB-InBev’s debt repayment is now spread out over several decades, with the last bonds maturing in 2059 (no typo). The message to investors: don’t worry, the whole edifice won’t come crashing down.
How cheeky
The brewer claimed that its debt-to-EBITDA ratio was 4 times or USD 85 billion at the end of 2019. Cunningly, AB-InBev’s finance honcho had already factored in the proceeds from the sale of its Australian unit CUB to Asahi to bring it to this level. However, the sale is still hanging in the balance.
AB-InBev plans to reduce its debt pile to around 2 times EBITDA eventually, which is deemed a safe and manageable level. It didn’t say when this will be.
As the Financial Times (FT) commentator pointed out, AB-InBev has mostly relied on disposals and cost cutting to reduce its debt, calling it a “brutishly crude model” which depends on low interest rates.
So where is the growth going to come from? With no deals in the offing and nothing left to sell, AB-InBev, these days, resembles an “ex-growth utility with a reduced dividend”, the FT sneered.
It’s a Sell!
The comparison may seem unflattering, but the FT’s final verdict is a real blow. “AB-InBev should feature in the annals of overblown M&A rather than in portfolios”, the article concludes.
Even before the FT spelt it out, many investors have heeded this advice. Since the takeover of SABMiller in 2015, AB-InBev has seen its share price more than halve.
