AB-InBev takes charge for Africa even as it saw June recovery
Belgium | AB-InBev’s performance in the second quarter took a bad hit. Profits were down by a third, while beer sales declined about 17 percent, in line with turnover shrinking 17 percent to USD 10 billion year-on-year.
In April, volume sales declined 32.4 percent, in May they were down 21.4 percent, but in June they grew by 0.7 percent, as countries began to ease lockdown regulations.
AB-InBev said on 30 July 2020 that it was excited by the reopening of bars, but cautious given renewed restrictions in certain markets and a second ban on alcohol sales from mid-July in South Africa.
The world’s major brewer reported it had conducted a review of the impact of the covid-19 pandemic on its business, and concluded it risked impairment in Africa. Therefore, it took a USD 2.5 billion write-down on its operations. It will be remembered that Africa was among the crown jewels secured in AB-InBev’s USD 122 billion purchase of SABMiller in 2016.
Debt load still high
However, AB-InBev suffered a sharp slide in earnings. In the second quarter, EBITDA dropped 34 percent to USD 3.4 billion over the same quarter last year. AB-InBev made a net profit of USD 351 million, compared with a profit of USD 2.5 billion a year earlier. No dividend has been declared.
The brewer announced that its net debt amounted to USD 87.4 billion by the end of June, down from USD 95.5 billion at the start of the year, following the sale of its Australian unit to Asahi.
But its closely watched leverage ratio – net debt to normalised EBITDA – was up to 4.86 times, compared with 4 times at the start of the year, and far above its preferred target of 2 times.
To some extent, AB-InBev has fared better in the quarter than Heineken. In a preliminary announcement Heineken reported it booked an impairment charge of EUR 550 million (USD 650 million) and said operating profit had dropped by more than half for the first six months of the year.
