Companies / 28 October 2019, 07:24am / Sandile Mchunu
DURBAN - The share price of Anheuser-Busch InBev (AB InBev) declined by more than 11percent on the JSE on Friday morning, wiping more than $20billion (R292bn) from its market capitalisation after the world's largest brewer missed its revenue and profit targets for the quarter to the end of September.
The group's revenue for the quarter came in at $13.2bn, below analysts’ expectations of $13.4bn.
As a result, the share declined to R1198.41 a share, down from the previous day's closing price of R1343.10. It recouped some of the losses in the afternoon before closing 9.91percent down at R1210.
Neil Wilson, a chief market analyst at Markets.com, said AB InBev’s third-quarter sales and profit were below the market's expectations.
“Yes, they missed on profits and revenues and have had to lower full-year guidance as a result. The revenue was $13.2bn below the expected $13.4bn, and it achieved organic sales growth of 2.7percent compared to 4.7percent expected by the market,” Wilson said.
The decline in third-quarter earnings has prompted the company to scale back its annual target for earnings before interest, tax, depreciation and amortisation, stating that it would be moderate instead of strong. The group saw only a marginal increase in its total volumes, which were up by 0.5percent during the quarter, with own-beer volumes down 0.9percent and non-beer volumes up by 4percent.
“Solid growth from markets such as Mexico, South Africa and Colombia was more than offset by declines in China and the US, both primarily driven by shipment phasing impacts,” the group said.
In the nine-month period, total volumes grew by 1percent, with own-beer volumes up by 0.7percent and non-beer volumes up by 3.6percent.
However, the combined revenues of global brands such as Budweiser, Stella Artois and Corona increased by 4.1percent globally and by 5.2percent outside their respective home markets.
The group completed two asset disposals recently in an effort to reduce its high debt of $104bn following the acquisition of South Africa’s SABMiller for $100bn in 2016.
AB InBev raised funds by listing its minority stake in Hong Kong by offering 1.26billion shares of a minority stake of its Asia Pacific subsidiary, Budweiser Brewing Company Apac, raising $5bn in the process.
It also sold its Australian operation to Japan’s Asahi for about $16.6bn.
Michael Treherne, a portfolio manager at Vestact Asset Management, said AB InBev had a massive debt burden because of buying SABMiller.
“As long as a company is growing, debt is not a problem. As soon as growth slows, then the debt becomes an anchor and profits tumble. That seems to be the case here,” Treherne said.