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Anheuser-Busch InBev regains swagger with Q2 signs of life - Analysis

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When Anheuser-Busch InBev first went public over its wish to acquire SABMiller in the distant days of October 2015, analysts, in general, were supportive. Since the deal was sealed, however, a string of disappointing financial results have dented that confidence somewhat.

AB InBev is expanding the footprint of its global beer brands including Budweiser

AB InBev is expanding the footprint of its global beer brands including Budweiser

Luckily, AB InBev's latest quarter has gone a long way to bring the smile back to analysts' faces, with yesterday's Q2 performance proving to some that the brewer has turned an important corner.

"After 18 months of disappointment there were signs that the King (of beer) may not be dead after all," said Bernstein's Trevor Stirling, echoing Barclays' Simon Hales, who said concerns ahead of the results proved to be "overdone".

"Moreover," continued Hales, "looking forward, we expect momentum to accelerate from here."

It was, in all, a vote of confidence in a company that in full-year results saw sales drop 3% and operating profits tumble 8%.

That new-found swagger in the City in the merits of the world's biggest brewer is down to a number of factors, not least an acceleration in synergy deliveries from the SABMiller deal. Q2, for example, returned US$335m and Hales expects $1.1bn of savings across the full year. 

The troublesome market of Brazil also appears to be stepping back into line after a long run of quarters in which the country's declining economy and worsening consumer demand hit volumes. According to Edward Mundy at Jefferies, Brazil's woes appear to be "cyclical not structural" and, with price-taking expected this year, AB InBev is in line for "a strong recovery in Brazil" in H2.

Add to that expected gains from the continued global expansion of Budweiser, Stella Artois and Corona - made possible by the SABMiller purchase - and optimism is abound. 

There are, of course, a few headwinds - a company that sells one in three of the world's beers can't have it all its own way.

Bernstein's Stirling noted that Q2's volume growth was "somewhat flattered" by over-shipping in the US, while easy comps in Argentina and South Africa also muddied the waters.

"Can we finally call the bottom on ABI's wretched string of results?" Stirling asked. "We remain cautious."

AB InBev may be progressing well with its SABMiller integration, but when it comes to winning over analysts, it still has some work to do.

Budweiser poised to beat Heineken, Guinness in Africa - Anheuser-Busch InBev CEO


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