USA: Anheuser-Busch restoring sales and earnings momentum

Anheuser-Busch executives expressed confidence in the improving outlook for the company in a presentation given at the Consumer Analyst Group of New York Conference on February 23.

"We have restored the volume growth momentum of our domestic beer company. We are in the process of restoring revenue per barrel growth through the implementation of our 2006 price plan, and are working to restore cost stability through a number of cost reduction programs. With our substantial leadership position and competitive advantages in domestic beer and our important strategic positions in key high growth markets internationally, we are confident we will restore our profit growth in 2006(1) and beyond," Patrick Stokes, president and chief executive officer, Anheuser- Busch Cos. Inc., told investors and analysts at the conference.

Through a number of new sales initiatives, the company restored its domestic beer volume and market share growth in the second half of 2005. Anheuser-Busch's wholesalers' sales-to-retailers increased 0.8 percent in the second half and grew 2.7 percent in the fourth quarter (both on a comparable selling day adjusted basis). Anheuser-Busch brands gained six-tenths of a share point at the consumer level in both the third and fourth quarters, according to IRI supermarket data. The company's sales momentum has carried over into 2006, with wholesalers' sales-to-retailers up 2.9 percent through mid-February.

For 2006, Anheuser-Busch's objective is to achieve a balance between volume and revenue per barrel growth in what is expected to be a more favorable pricing environment, said Stokes. The domestic beer company successfully implemented moderate price increases and discount reductions in a few markets late last year and more broadly in January and February of this year. In total, the company's pricing actions cover over one-half of Anheuser-Busch's volume and price increases are typically in the 2 to 3 percent range.

Restoring cost stability is expected to take longer than restoring volume and pricing. Over the last three years, the domestic beer company has experienced substantial increases in commodity costs, most recently from aluminum, glass and energy. Commodity cost pressures continue in 2006. Commodity costs tend to be cyclical over the long-term and the company is actively working on a number of productivity initiatives to improve the cost outlook.

Meanwhile, the company's international beer segment continues to make substantial contributions to the company's earnings growth and is strategically well-positioned for long-term growth with its key investments in Mexico and China.

W. Randolph Baker, vice president and chief financial officer, also addressed the group, providing an update of the company's long-term earnings growth model, which targets average annual earnings per share growth in the 7 to 10 percent range. The company did not give specific earnings per share guidance for 2006 other than reiterating its expectation that earnings per share would increase this year versus normalized 2005 results.

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