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AB InBev (BUD) Posts Q1 Loss on Decline in On-Premise Volume

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Anheuser-Busch InBev SA/NV (BUD - Free Report) , alias AB InBev, reported first-quarter 2020 results, wherein the bottom line missed estimates and compared unfavorably with the year-ago figure. This marked its third consecutive quarter of earnings miss. Moreover, revenues were down year over year due to a decline in volume on the coronavirus outbreak, offset by a rise in revenues per hectoliter (hl).

The company started 2020 on a strong note, recording volume growth of 1.9% in the first two months of the quarter, excluding the China business, which was affected by the coronavirus outbreak, beginning late January 2020. However, greater impacts of the outbreak began showing on its results toward the end of the quarter as lockdowns were enforced in most of its markets from mid-March.

Most of the declines in volume mainly related to the closure of restaurants and bars, which affected the company’s on-premise channel sales. Notably, the on-premise channel represented nearly one-third of its global volume in the year-ago quarter. However, the company is witnessing accelerated growth in its e-commerce channel though representing a smaller portion of total volume.

Going forward, it expects the impacts of the pandemic on its second quarter to be more severe than the first quarter due to extended lockdowns and social distancing measures adopted by the governments. Evidently, the company notes that global volumes declined nearly 32% in April, driven by the continued closure of the on-premise channels in most markets as well as restrictions on some operations due to the pandemic.



Overall, shares of the company have slumped 42.8% in the past three months compared with the industry’s decline of 22.6%.

Q1 Highlights

The company reported a normalized loss per share of 42 cents against earnings per share of $1.21 reported in the year-ago quarter. Moreover, the bottom line missed the Zacks Consensus Estimate of a loss of 18 cents. Earnings were marred by the soft top line, margin contraction, operational deleverage on volume resulting from the impacts of the COVID-19 outbreak and transactional currency headwinds.

AnheuserBusch InBev SANV Price, Consensus and EPS Surprise


AnheuserBusch InBev SANV Price, Consensus and EPS Surprise

AnheuserBusch InBev SANV price-consensus-eps-surprise-chart | AnheuserBusch InBev SANV Quote

Underlying earnings per share (normalized EPS, excluding mark-to-market gains and losses related to the hedging of share-based payment programs, and the impact of hyperinflation) were 51 cents in first-quarter 2020, down 30.1% from 73 cents earned in the year-ago quarter.

Revenues of $11,003 million declined 10% from the year-ago quarter. The company registered an organic revenue decline of 5.8% primarily due to a decrease in volume sold on the coronavirus pandemic. Meanwhile, revenues per hectoliter (hl) improved 3.9%, driven by gains from ongoing premiumization and revenue-management initiatives.

Total organic volume declined 9.3%, with a 10.5% decrease in own-beer volume and a 0.2% fall in non-beer volume. Excluding China, organic volume declined 3.6% in the first quarter despite recording growth of 1.9% in January and February.

Consolidated revenues at the company’s three global brands — Budweiser, Corona and Stella Artois — declined 11% globally and 17.5% outside their respective home markets in the first quarter. The slump was mainly attributed to significant declines in China, which more than offset growth across the majority of its markets. Notably, China is the largest market for both Budweiser and Corona, outside of their home markets.

The cost of sales declined 4.3% to $4,573 million and was flat on an organic basis. Further, organic cost of sales per hl increased 10.3% due to operational deleverage on volumes due to the COVID-19 outbreak and transactional currency headwinds.

The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $3,949 million, which declined 17.7% year over year and 13.7% on an organic basis. Normalized EBITDA margin contracted 340 basis points (bps) to 35.9% and declined 331 bps organically.

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