AB InBev shares jump after brewer halves its dividend to save R20 billion
ANHEUSER-Busch InBev (AB InBev) yesterday jumped 2.77 percent to R876.93 on the JSE after the brewer halved its dividend to save $1.1 billion (R20bn) as the coronavirus (Covid-19) hit its sales with bars shutting and beer drinking curbed.
The brewer revised its final 2019 dividend to 50 cents a share, saying it was rescheduling its ordinary and extraordinary shareholders’ meeting to June due to the pandemic.
The group said it had rewarded shareholders with a total dividend of €1.30 (R25.68) per share in 2019, including the €0.80 interim dividend paid in November.
“The dividend will be paid out of the company’s operating results for 2019, increased with the profits carried over, without drawing on any capital reserves,” said the company.
Nesan Nair, a senior portfolio manager at Johannesburg-based Sasfin Securities, said yesterday that the decision to halve the dividend came as little surprise, given the company’s debt burden.
“The decision comes as no surprise to the market at all. Revenue will be down and remember, they have a pile of debt to service, so will need to redirect cash from shareholders to creditors,” said Nair.
The group said in February that the coronavirus outbreak had led to a significant decline in demand in on-premise channels, including nightlife and restaurants. At the time the outbreak was confined to China.
It estimated that the first two months resulted in lost revenue of about $285 million and lost earnings before interest, tax, depreciation and amortisation (Ebitda) of about $170m in China.
It said Ebitda was expected to decline by about 10 percent in the first quarter of 2020 and off a high base in the first quarter of 2018.
“The impact of the Covid-19 virus outbreak on our business continues to evolve,” AB InBev said. “The outbreak has led to a significant decline in demand in China, in both on-premise and in-home channels. Additionally, demand during the Chinese New Year was lower than in previous years as it coincided with the beginning of this outbreak.”
The brewer said its Ebitda grew 2.7 percent in 2019 with a margin contraction of 65 basis points to 40.3 percent, way below its estimates.
Group debt declined to $95.5bn at the end of December from $104.2bn in 2018.
The group said net debt would likely be adjusted to $84.6bn in 2019 when taking into account the proceeds expected to be received from the divestment of the Australian operations.