In the Spotlight - Anheuser-Busch InBev motors on
Budweiser's World Cup performance earns praise
Anheuser-Busch InBev brought optimism roaring back into the drinks sector this week by posting a healthy set of half-year numbers. just-drinks examines the market reaction.
Given ongoing economic uncertainty in many markets, the mood in the alcoholic drinks sector has see-sawed from gloom to hope and back again so far in 2010. This is particularly true in beer, where recession has accelerated volume sales declines in many European markets and especially in the US.
Anheuser-Busch InBev yesterday (12 August) returned hope to large sections of the drinks sector by reporting rises in sales, volumes and profits for the first half of 2010 and predicting further increases in the second half of the year. The brewer's share price subsequently rose by 4% on the New York Stock Exchange as investors rallied to the firm's banner.
Analyst group Sanford C Bernstein raised its earnings per share guidance on the Budweiser brewer by 5% for the full-year, following the results.
"Unlike some other global consumer product group companies, A-B InBev is showing how the brewing industry in general, and A-B InBev in particular, is able to generate solid and improving global volume trends without resorting to price cuts, and at the same time increase advertising and promotion spend and expand margins," said Bernstein.
A-B InBev's beer sales by volume did fall by 5% in North America for the six months to the end of June, while volumes also slipped heavily in Eastern Europe and slightly (by 0.5%) in Western Europe. Brazil, meanwhile, was the backbone of the brewer's volume performance, showing 15% growth over the half-year.
Renne Schultes, writing for the Wall Street Journal, warned that the brewer still faces challenges. "It has yet to convince investors it can improve sales in the US," said Schultes, adding that market share gains have been "disappointing".
Analayst David Sekera, for the Toronto Star, agreed that A-B InBev "still needs to work on maintaining its market share". However, both Sekera and Schultes said that the firm's general outlook was positive due to easier comparisons in the US in the second half of the year and its progress on cutting debt.
Many reports, particularly in the UK, focused on Budweiser's gains from its position as official sponsor of the FIFA World Cup in South Africa, which kicked off in the second quarter. "World Cup fizzes up A-B InBev sales," chimed the UK's Daily Telegraph newspaper. Other articles highlighted the contrast between Budweiser's performance, with volume sales up 70% in the UK, and that of the England national team.
Returning to a global level, analyst group Stifel Nicolaus proved harder to impress. Stifel analyst Mark Swartzberg said that A-B InBev exceeded estimates and was on-track to cut debt more quickly than expected over the course of 2010.
However, Stifel maintained its 'hold' rating on A-B InBev stock, rather than stepping up to 'buy'. "We continue to believe runrate EBITDA growth, ex currency, is slowing (eg, 2010 estimated up 9%, 2009 up 16.6%) due to slowing incremental cost saves, increasing brand support, and the likelihood that Brazil remains strong but less strong while North America picks up," said Swartzberg.
Even so, A-B InBev has left investors and analysts searching for negatives and risks within a positive set of results, rather than the other way around.
There are sound reasons behind Anheuser-Busch InBev's foray into the cider market with Stella Cidre, but the brand needs to be clear about what it's trying to do if it's going to survive as a latecome...
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