AB InBev shares show big gain as rev­enue is up by 13.4%

The Star Early Edition - - BUSINESS - Sandile Mchunu

AN­HEUSER-Busch InBev (AB InBev), the world’s largest brewer by sales, leapt more than 5 per­cent on the JSE, fol­low­ing bet­ter than ex­pected half-year re­sults to end June.

Earn­ings rose 11.8 per­cent to $5.35 bil­lion (R69.63bn) on an ad­justed ba­sis be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion.

“Our beer rev­enues in South Africa grew by 13.4 per­cent in the first half of 2017, driven by beer vol­ume growth of 10.8 per­cent and ben­e­fit­ing from the tim­ing of Easter,” the group said. How­ever, it re­ported muted growth in rev­enue in the US, where it achieved 0.9 per­cent and a de­cline of 0.7 per­cent in Brazil.

Jor­dan Weir, equities trader at BayHill Cap­i­tal, said these re­sults were def­i­nitely bet­ter than ex­pected and should make the com­pany and its share­hold­ers happy, es­pe­cially given that pre­vi­ous quar­ters were not too as­sur­ing.

“The pos­i­tive ef­fects of the SABMiller takeover seem to be rolling through in the num­bers, es­pe­cially when it comes to cut­ting costs. Both ver­ti­cal in­te­gra­tion and a more fo­cused drive on prod­uct place­ment has def­i­nitely shown its ef­fec­tive­ness in the growth in rev­enue as well as a ro­bust bot­tom line,” said Weir.

More fo­cussed

AB InBev ac­quired SABMiller last Oc­to­ber for $103bn. Weir said once again, AB InBev’s more fo­cussed prod­uct place­ment had been a key driver in South African sales.

Cas­tle Light, Black La­bel and Fly­ing Fish were some of the ma­jor driv­ers of rev­enue on South African shores for the busi­ness.

“A good up­take in InBev’s newly in­tro­duced high end beers, Stella Ar­tois and Corona, was also seen. In the big­ger pic­ture, with South Africa be­ing in a tech­ni­cal re­ces­sion, it shows that InBev has def­i­nitely got an “all weather” busi­ness on its hands,” Weir said.

Prospects look good for the com­pany in the coun­try. A re­port by the World Health Or­gan­i­sa­tion said last year showed that South Africa ac­counted for 34 per­cent of Africa’s for­mal beer mar­ket and was ex­pected to grow by 8 to 10 per­cent an­nu­ally.

Mer­gence In­vest­ment Man­agers’ port­fo­lio man­ager, Dirk Steyn, said the mar­ket was very en­cour­aged by AB InBev’s sec­ond quar­ter 2017 re­sults.

“With or­ganic sales up 5 per­cent beat­ing con­sen­sus and vol­umes pos­i­tive for the first time in six quar­ters, the com­pany’s pre­mi­u­mi­sa­tion strat­egy seem to be work­ing, with its global pre­mium brand Corona, Stella Ar­tois and Bud­weiser out­per­form­ing the rest of the port­fo­lio,” Steyn said.

Steyn added that Brazil still seems weak, but there was pos­i­tive vol­ume sur­prise from Mex­ico, South Africa and Aus­tralia to com­pen­sate.

The brewer saw an over­all 1 per­cent in­crease in beer vol­umes and shifted con­sumers on to higher priced beers, re­sult­ing in a 5 per­cent in­crease in rev­enues to $14.18bn.

Cash flow from op­er­at­ing ac­tiv­i­ties reached $4.02bn in the first half of 2017 com­pared to $2.45bn in the first half of 2016.

Its share price rose 6.87 per­cent to close at R1 605.05 on the JSE yes­ter­day.

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