AB InBev expects 2021 recovery as threat from pandemic recedes

Belgium | AB-InBev took a hit to revenue and volume sales in 2020, but expects a better outcome this year. The world’s major brewer, on 26 February 2021, reported a smaller hit to 2020 sales than expected and said it will see “meaningfully” better numbers this year as the pandemic begins to recede.

The brewer of Budweiser, Stella Artois and Corona said that revenue dropped to USD 47 billion from USD 52 billion (2019), as the lockdowns affected its business. Underlying profit declined almost a third to USD 5 billion from USD 7.2 billion a year earlier.

Total volumes were down 5.7 percent organically (or 31 million hl in total), most of which was attributed to reduced beer sales (467 million hl versus 495 million hl in 2019). However, the group pushed up the volumes of beer it sold by 1.6 percent in the final quarter of 2020, which it interpreted as a sign of recovery.

Nevertheless, it warned that pressure on margins would remain significant, due to rising commodity prices and the higher cost of packaging for drinks consumed at home.

Partly saved by online sales

Drinks volumes declined in every region of the world in 2020, except for South America, with Europe, Asia and South Africa hit particularly hard. AB-InBev said drinkers changed their habits last year by buying more beer online, which reduced the impact of bar and pub closures on sales. Direct digital sales of beer to consumers already made up a “meaningful” proportion of revenues in Brazil, for example.

The better-than-expected numbers did not do much for AB-InBev’s share price. Shares in the group declined more than 5 percent on 26 February, which analysts said was down to concerns about margins and the fact that earnings for 2020 were boosted by a tax credit in Brazil.

Debt load remains high

The company’s response to the pandemic has been complicated by a debt burden dating from its takeover of SABMiller in 2016, the Financial Times newspaper said.

Net debt dropped 13.4 percent to USD 82.7 billion in 2020, partly thanks to the sale of its Australian unit, Carlton & United Breweries, to Asahi. But the closely watched ratio of net-debt-to-EBITDA swelled from 4 times to 4.8 times.

AB-InBev wants to reduce the figure to 2 times, and recently raised USD 3 billion through the sale of a 49.9 percent stake in its US metal container firm. “We will prioritise debt repayment in order to meet this objective,” the company said.

No redundancies

Unlike rival Heineken, which said it would cull 8000 jobs or 9 percent of its global workforce, AB-InBev is not contemplating large-scale redundancies. “We tend to be very efficient in our operations [already],” CEO Carlos Brito said.

After scrapping its interim dividend in 2020, the company said it would pay out a full-year dividend of EUR 0.50 (USD 0.60) per share, down 50 percent from the previous year.

A successor for Brito?

Meanwhile, Bloomberg news service reported that Michel Doukeris, head of AB-InBev’s North America operations, has emerged as the front-runner to succeed CEO Brito. The board aims to announce a leadership change in the coming weeks before the company’s annual general meeting in April, Bloomberg said. The succession was first reported by the Financial Times in September last year, but later refuted as a rumour by Mr Brito.