World’s biggest brewer AB InBev scraps dividend despite growth in revenue in Q3

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KEY FIGURES 

  • Revenue: Ab Inbev’s revenue grew by 4.0% in 3Q20, positively impacted by a healthy volume performance and revenue per hl growth of 2.3%. In 9M20, revenue declined by 6.8% with revenue per hl growth of 1.6%.
  • Volume: Total volumes for Ab Inbev grew by 1.9% in 3Q20, with own beer volumes up by 2.6% and non-beer volumes down by 2.5%. In 9M20, total volumes declined by 8.2%, with own beer volumes down by 8.3% and non-beer volumes down by 5.9%.
  • Global Brands: Combined revenues of our global brands, Budweiser, Stella Artois and Corona, increased by 6.8% globally and by 8.1% outside of their respective home markets in 3Q20. In 9M20, the combined revenues of our global brands declined by 7.2% globally and by 7.5% outside of their respective home markets.
  • Cost of Sales (CoS): CoS increased by 9.6% in 3Q20 and by 8.3% on a per hl basis, driven primarily by supply chain adjustments implemented to meet evolving demand. In 9M20, CoS increased by 1.4% and increased by 10.8% on a per hl basis.
  • EBITDA: EBITDA of 4 892 million USD represents a decrease of 0.8% in 3Q20, with EBITDA margin contraction of 188 bps to 38.2%. In 9M20, EBITDA declined by 16.7% to 12 254 million USD and EBITDA margin contracted by 432 bps to 35.9%.
  • Net finance results: Net finance costs (excluding non-recurring net finance results) were 1 333 million USD in 3Q20 compared to 677 million USD in 3Q19. Net finance costs were 5 537 million USD in 9M20 compared to 2 047 million USD in 9M19. The increase in 9M20 was primarily driven by a mark-to-market loss of 1 747 million USD linked to the hedging of our share-based payment programs compared to a gain of 1 672 million USD in 9M19, resulting in a swing of 3 419 million USD.
  • Income taxes: Ab Inbev’s Normalized effective tax rate (ETR) increased from 22.6% in 3Q19 to 26.2% in 3Q20. Excluding the impact of gains and losses relating to the hedging of our share-based payment programs, our normalized ETR was 26.0% in 3Q20 compared to 26.8% in 3Q19. Normalized ETR increased from 22.8% in 9M19 to 37.2% in 9M20 and, excluding the impact of gains and losses relating to the hedging of our share-based payment programs, normalized ETR decreased from 27.2% in 9M19 to 24.3% in 9M20.
  • Non-recurring items: Normalized EBIT excludes negative non-recurring items of 92 million USD in 3Q20 and 969 million USD in 9M20.
  • Profit: Ab Inbev’s Normalized profit attributable to equity holders of AB InBev was 1 578 million USD in 3Q20 compared to 2 412 million USD in 3Q19 and was 1 654 million USD in 9M20 versus 7 125 million USD in 9M19. Underlying profit (normalized profit attributable to equity holders of AB InBev excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 1 601 million USD in 3Q20 compared to 1 870 million USD in 3Q19, and was 3 407 million USD in 9M20 compared to 5 462 million USD in 9M19.
  • Earnings per share (EPS): Normalized EPS in 3Q20 was 0.79 USD, a decrease from 1.22 USD in 3Q19. Normalized EPS in 9M20 was 0.83 USD, a decrease from 3.59 USD in 9M19. Underlying EPS (normalized EPS excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 0.80 USD in 3Q20, a decrease from 0.94 USD in 3Q19, and was 1.71 USD in 9M20, a decrease from 2.76 USD in 9M19.
  • Interim Dividend: While our business is delivering improving results, we continue to face uncertainty and volatility arising from the COVID-19 pandemic. In that context, our Board determined that it would be prudent and in the best interest of the Company to forgo the interim 2020 dividend payment. This decision is consistent with our financial discipline and prioritizes our deleveraging commitments, which have been impacted by the COVID-19 pandemic. The Board’s proposal with respect to the full year 2020 dividend will be announced with our FY20 results on 25 February 2021.

World’s biggest brewer AB InBev scraps dividend despite growth in revenue in Q3 Brandspurng

MANAGEMENT COMMENTS 

Delivering Strong Results in a Challenging Environment

Our third-quarter results reflected our fundamental strengths as a company and the ongoing resilience of the global beer category. Revenue grew by 4.0% in 3Q20, with a healthy balance of total volume growth of 1.9% and revenue per hl growth of 2.3%. Top-line growth was offset by higher CoS as we rapidly adjusted our supply chain to meet evolving demand, resulting in a slight EBITDA decline of 0.8% with margin contraction of 188 bps to 38.2%.

World’s biggest brewer AB InBev scraps dividend despite growth in revenue in Q3

  • Successful commercial strategy executed with a best-in-class brand portfolio: Our global brands and High-End Company outperformed this quarter, with the global brand portfolio revenue increasing by 8.1% (outside of the brands’ home markets) and the High-End Company revenue up by 6.5%, demonstrating the continued strength of the premiumization trend. We also improved our performance in our core portfolio, as consumers gravitated toward established brands that they know and trust. Growth was further enhanced by highly successful innovations, including Brahma Duplo Malte in Brazil and Bud Light Seltzer in the US.
  • A relentless commitment to operational excellence and agility driving market share gains: With a best-in-class global supply chain and unparalleled scale, we are excelling with our customers in service level and product availability. We gained market share in the majority of our key markets this quarter by combining the strength of our operations with a winning commercial strategy and unrivalled brand portfolio.
  • Confidence in the resilience of our business and the global beer category: Consumers quickly adjusted to the new reality by shifting to in-home consumption occasions, increasing adoption of the e-commerce channel and finding new ways to connect with others. Our teams pivoted quickly to meet these evolving consumer needs, resulting in beer volume growth of 2.6% even in the context of ongoing global on-premise restrictions.
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Committed to Deleveraging while Proactively Managing our Debt Portfolio

We continue to exercise financial discipline and support the long-term growth of our business by proactively managing the factors within our influence.

  • Forgoing the 2020 interim dividend payment to prioritize deleveraging commitments: While our business is delivering improving results, we continue to face uncertainty and volatility arising from the COVID-19 pandemic. In that context, our Board determined that it would be prudent and in the best interest of the Company to forgo the interim 2020 dividend payment. This decision is consistent with our financial discipline and prioritizes our deleveraging commitments, which have been impacted by the COVID-19 pandemic. The Board’s proposal with respect to a full year 2020 dividend will be announced with our FY20 results on 25 February 2021.
  • Proactive measures significantly reduced upcoming liabilities: Since 30 June 2020, we successfully redeemed
  • approximately 11.4 billion USD of near-term debt through a combination of tender and make-whole exercises while extending the weighted average maturity of our bond portfolio.

Scaling New Digital Capabilities to Create Value for Customers and Consumers

We are seeing a rapid acceleration in trends such as online B2B platforms, e-commerce and digital marketing. We have been investing in these capabilities for many years, as we advance toward being a true customer- and consumer-centric organization.

  • Digitizing our relationships with our customers: By establishing a digital connection through our proprietary B2B platform, BEES, we are providing our customers with convenience, seamless communication and, most importantly, enhanced business performance. We are expanding the platform to more markets and seeing rapid adoption, with our number of global B2B users increasing by nearly 40% in the quarter.
  • Consistent investments in e-commerce platforms are positioning us to lead online beer sales: Our direct-to-consumer initiatives offer convenience and leverage valuable data that allows us to stay one step ahead of emerging trends. Proprietary platforms and our third-party partnerships both rapidly accelerated over the past several months, establishing our e-commerce leadership in key markets. In Brazil, Zé Delivery uses technology to connect existing retail networks to consumers and continues to gain traction. It is now present in all 27 Brazilian states and saw a significant acceleration in the number of orders completed in 3Q20.
  • Finding new ways for our brands to connectwith consumers: With our in-house agency, draftLine, we are building and delivering consumer-first marketing executions. The agility of draftLine has proven key to our business in the changing COVID-19 environment. In the UK, we leveraged PerfectDraft, our all-in-one appliance that serves fresh draught beer at home. PerfectDraft and draftLine identified an opportunity to celebrate Oktoberfest at home following its cancellation. Together, they successfully developed, launched, and optimized a full digital, outdoor and TV campaign. This more than quadrupled the growth rate of home draught machine sales versus last year during the campaign, highlighting the benefits of owning the insights and creative process internally.
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Fundamental Strengths Position Us Favorably for a Strong Recovery

While we expect our performance in the second half of this year to be better than the first, the environment remains volatile and uncertain, especially as some governments are renewing restrictions in several markets. We will leverage the fundamental strengths of our company – our diverse geographic footprint with access to high-growth regions, our clear commercial strategy, the world’s most valuable portfolio of beer brands, industry-leading profitability and, most importantly, our talented team of true owners – to continue our momentum in this fast-changing environment and drive the business forward toward a strong recovery.

South Africa

Consumer demand remains strong, though results were impacted by the one month ban on alcohol sales

Our business in South Africa was significantly impacted by the second outright ban on the sale of alcoholic beverages from mid-July to mid-August, resulting in volume and revenue declines of nearly 25% in 3Q20. We observed robust consumer demand once the government lifted the ban with volume growth resuming in September.

Revenue per hl was flattish as revenue management initiatives were largely offset by mix impacts as consumers shifted to more affordable brands and bulk returnable packages. This trend benefitted our core portfolio, particularly Castle Lager and Carling Black Label.Our flavoured alcohol beverages, Brutal Fruit and Flying Fish, also outperformed this quarter, reinforcing the advantage of our diverse brand portfolio to meet consumer needs across styles and price points. EBITDA declined with considerable margin contraction, driven by operational deleverage from the month-long outright ban, partially offset by cost-savings initiatives.

In 9M20, volume and revenue declined by nearly 30%, leading to a significant EBITDA decline and margin contraction.

In Africa excluding South Africa, the majority of our markets demonstrated ongoing resilience and continued recovery from the second quarter. Ab Inbev delivered healthy volume growth in Mozambique, Uganda and Zambia, though volumes declined in Tanzania. In Nigeria, we delivered double-digit volume growth as COVID-19 restrictions continued to ease. We are seeing success in the market from investments made in enhancing our brand portfolio and advancing our route-to-market capabilities.

Ab Inbev faced a challenging operating environment in South Korea in the third quarter, due to another COVID-19 outbreak that severely impacted consumer confidence and resulted in significant restrictions on the on-premise channel. However, Ab Inbev’s volumes returned to growth year-over-year, driven by a favourable comparable in 3Q19. Total revenue and revenue per hl grew by mid-single digits, driven by channel mix and the benefit of the excise tax reform implemented earlier this year. We continued to lead the premium segment with three of the top five premium brands in the country.

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