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

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.