AB InBev cuts dividend payout as rising rates squeeze debtors
LONDON: Anheuser-Busch InBev NV, the world’s largest brewer, cut its dividend in half as it seeks to pay down its US$109bil debt mountain, much of it taken on to acquire rival SABMiller Plc in 2016.
The Budweiser maker justified its move by pointing to the plunge in emerging-market currencies, which is crimping its cash flow. Third-quarter profit missed analysts’ expectations and sales growth slowed to the weakest pace in more than a year. The stock plunged as much as 9.2% amid a global sell-off.
The most generous dividend-payer in the food-and-beverage industry is pulling back to protect itself as the US Federal Reserve increases borrowing costs.
The move comes as a number of payments are increasingly in doubt, including that of General Electric Co. Consumer-goods makers with the highest dividend yields include Kraft Heinz Co and General Mills Inc. Such debt-laden companies are struggling to reduce leverage amid competition from small upstarts.
Adjusted ebitda rose 7.5%, the Leuvenbased brewer said yesterday. Analysts expected 11% growth.
About 58% of the brewer’s debt is in dollars, while the company’s largest markets include Brazil, Colombia and South Africa.
AB InBev said the new dividend policy will make it easier to reach its goal of reaching a debt level that’s equivalent to two times earnings before interest, taxes, depreciation and amortisation.
The brewer may be trying to strengthen its finances in case acquisition opportunities arrive, wrote Nico von Stackelberg, an analyst at Liberum.
“ABI needs a strong balance sheet to have the debt market’s confidence to do big deals,” he wrote, saying it could allow the brewer to bid for assets from the Castel family if they come on the market. Bordeaux-based Castel Group owns beer assets in addition to businesses in wine and soft drinks.
The Budweiser maker will use the entire US$4bil it saves to pay down debt, chief financial officer Felipe Dutra told journalists on a call. AB InBev has US$1.5bil of borrowings maturing this year, US$3bil next year and US$6bil in 2020, he said.
The US market, where the company has struggled to reinvigorate its staple Budweiser and Bud Light brands, showed a rebound, with revenue returning to growth in the third quarter. In Brazil, beer volumes dropped about 3%, worse than the overall market, Dutra said.
Carlsberg A/S upstaged its larger rivals by raising its earnings forecast for this year to an increase of as much as 11%.
The same day, Heineken NV reported volume growth in the third quarter that beat estimates despite its key region of Asia Pacific slowing to its weakest pace in three years. — Bloomberg