AB InBev profit hit hard by alcohol ban, Newsline

DURBAN – Anheuser-Busch InBev (AB InBev) yesterday decried the government’s ban on alcohol sales and transportation this year, telling its shareholders that the restrictions hit its profits very hard in the nine months to end September.

AB InBev said that the restrictions to contain the spread of Covid-19 across the globe saw its total earnings before interest, tax, depreciation and amortisation (Ebitda) fall 16.7 percent to $12.25 billion (about R200bn).

It flagged that revenue and volumes in South Africa declined 30percent during the period as the second outright ban on the sale of alcohol beverages from July to August resulted in lower consumption. The group said that volumes improved in the third quarter, but remained down 25percent year-on-year.

It said overall revenue fell 6.8percent during the period, but picked up 4percent in the third quarter on healthy volume performance and revenue growth of 2.3percent in the first half of the year.

AB InBev said total volume declined 8.2percent with beer down 8.3percent and non-beer volumes down by 5.9percent, but total volumes in the third quarter inched-up by 1.9percent, with own beer volumes up by 2.6percent and non-beer volumes down by 2.5percent.

Chief executive Carlos Brito said the group’s third quarter results reflect their fundamental strengths as the world’s leading brewer and the resilience of the global beer category.

“We delivered a strong and balanced top-line performance by quickly adapting to meet the evolving needs of our customers and our consumers. In an ongoing volatile and uncertain environment, we remain focused on being part of the solution by prioritising the health and well-being of our people, communities and customers,” Brito said.

In August, AB InBev canned a R2.5bn expansion plan after saying that its production fell 20percent during the first 12 weeks ban on alcohol sales and transportation.

The government reimposed the ban in July as the number of Covid-19 cases surged.

Yesterday, the group said its performance was hampered by the restrictions.

Brito said consumer demand in South Africa, however, remained strong, despite the ban of alcohol sales during the period.

“We observed robust consumer demand once the government lifted the ban with volume growth resuming in September,” Brito said.

However, its revenue for the first half remained flat as revenue management initiatives were largely offset by mix impacts as consumers shifted to more affordable brands and bulk returnable packages.

The group said this trend benefited its core portfolio, especially 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,” the group said, adding that the Ebitda declined with considerable margin contraction, driven by operational deleverage from the month-long outright ban, but was partially offset by cost-savings initiatives.

The group’s global brands, which includes Budweiser, Stella Artois and Corona, reported revenue growth of 6.8 and 8.1percent outside of their respective home markets during the quarter.

In the nine-month period, global brands revenue declined by 7.2 and 7.5 percent outside their respective home markets.

AB InBev shares rose 1.99percent on the JSE yesterday to close at R881.17.