World: AB InBev reports smaller hit to 2020 sales than expected

The world’s largest brewer Anheuser-Busch InBev reported a smaller hit to 2020 sales than expected and said it expected “meaningfully” better numbers this year as the pandemic began to recede.

The brewer of Budweiser, Stella Artois and Corona said on February 25 that like-for-like revenues, stripping out the impact of acquisitions and disposals, dropped 3.7 per cent to $47bn as the lockdowns hit its business.

Underlying profit dropped almost a third to $5bn from $7.2bn a year earlier.

However, the group pushed up the volumes of beer it sold by 1.6 per cent in the final quarter of the year, in what it said was a sign of recovery. While AB InBev expects better sales and profits in 2021, it cautioned that pressure on margins would continue thanks to rising commodity prices and the higher cost of packaging for drinks consumed at home.

Drinks volumes declined in every region of the world in 2020 apart from South America, with Europe and Asia particularly badly hit. The volume of drinks it sold fell 5.7 per cent. Sales rebounded strongly in the key markets of Brazil and Mexico in the fourth quarter, however.

Carlos Brito, chief executive, said 2020 had been “a year of two halves . . . our volumes in the second half grew by more than 2 per cent and I think that is a testament to how important it is, when consumers are allowed out, to have a strong portfolio and innovations that matter”.

The Belgium-based company, which also brews Brahma, Leffe and Modelo, 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, said Brito.

Shares in the group declined more than 5 per cent on Thursday, which analysts said was down to concerns about margins and the fact that earnings for 2020 were flattered by a tax credit in Brazil.

The company’s response to the pandemic has been complicated by a debt burden dating from its takeover of SABMiller in 2016. Net debt dropped 13.4 per cent to $82.7bn in 2020, partly thanks to the sale of an Australian subsidiary, but the closely watched ratio of net debt to earnings before interest, tax, depreciation and amortisation swelled from 4 times to 4.8 times.

AB InBev wants to reduce the figure to 2 times, and last year raised another $3bn through the sale of a minority stake in its US metal container operations. “We will prioritise debt repayment in order to meet this objective,” the company said.

Unlike rival Heineken, however, AB InBev is not contemplating large-scale job cuts, said Brito. “We tend to be very efficient in our operations [already],” he said.

After scrapping its interim dividend in 2020, the company said it would pay out a full-year dividend of €0.50 a share, down 50 per cent from a year earlier.

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