A-B InBev to identify fresh synergies

A-B InBev to identify fresh synergies

Anheuser-Busch InBev has said it is working on a fresh round of cost savings beyond the close of its current synergies programme in 2011.

The Stella Artois and Budweiser brewer said today (4 March) that it remains on-track to achieve US$2.25bn in annual savings by the end of 2011, following synergies from Inbev's deal to acquire A-B in late 2008.

Cost cutting is to remain a focus for the group in the longer term, however.

"We are working hard to find additional synergies beyond 2011," group chief financial officer Felipe Dutra told analysts at the brewer's full-year results conference call today. "We are not quantifying [them] at this stage," he added.

A-B InBev today declared the $52bn A-B takeover "essentially complete", following the brewer's agreement to refinance debt related to what was the most expensive deal in brewing industry history.

Aside from more than $7bn raised in 2009 via asset disposals, the brewer also realised $1bn in synergies from the A-B deal. It expects to achieve a further $500m of the total $2.25bn synergy target in 2010. 

Dutra said that cut-backs will not affect brand investment. "We will continue to supply all support to our brands as needed," he told analysts.

Beer markets, particularly in Western Europe, North America and Russia, are set to remain weak in 2010, A-B Inbev predicted, echoing similar warnings from rival brewers Heineken, Carlsberg and Molson Coors.

The brewer reported a 1% fall in beer volume sales in 2009, although this reversed to a 1% rise in the fourth quarter.

In Western Europe, where the brewer plans to cut 10% of its workforce, group own-beer volume sales slipped by 2.4% in 2009, with the biggest falls in Germany and the UK. North America beer volume sales fell by 2% for the 12 months, compared to the same period of 2008.  

Total volume in Latin America South also fell by 4% over the year, but results were held up by 9% growth in Latin America North, driven by a 10% rise in AmBev's home country, Brazil.

A contrast between Brazil and mature markets led analyst group Stifel Nicolaus to label the results "a tale of two regions" in a note today.

A-B InBev predicted, despite fewer synergies, less opportunity for beer price rises and tough comparables in the first half, that it will grow EBITDA in 2010.

The group today reported a rise in underlying profits (EBITDA) of 16.6% to US$13bn for the 12 months to the end of December. This compared to equivalent combined earnings of $12bn for the separate InBev and A-B businesses in 2008.

Price rises masked weak beer volume sales to help the brewer to increase like-for-like net sales by 2.5% in 2009, to $36.75bn.