AB InBev, the world’s largest brewer, said it lost $170 million in profits during the first two months of 2020 because of the coronavirus epidemic.
The company said the outbreak has led to a “significant decline” in demand in China, resulting in lost revenue of approximately $285 million during the period.
- Revenue: Revenue grew by 4.3% in FY19 and by 2.5% in 4Q19, with revenue per hl growth of 3.1% in FY19 and a0.9% in 4Q19. Healthy volume growth was enhanced by global premiumization and revenue management initiatives, although revenue per hl growth decelerated as a result of advances in our smart affordability strategy.
- Volume: Total volumes grew by 1.1% in FY19, with own beer volumes up 0.8% and non-beer volumes up 4.8%. In 4Q19, total volumes increased by 1.6%, with own beer volumes up 0.8% and non-beer volumes up 8.0%.
- Global Brands: Combined revenues of our three global brands, Budweiser, Stella Artois and Corona, grew by 5.2% in FY19 and by 2.1% in 4Q19. Outside of their respective home markets, the global brands grew by 8.0% in FY19 and by 3.9% in 4Q19.
- Cost of Sales (CoS): CoS increased by 7.4% in FY19 and by 5.9% on a per hl basis, driven by significant commodity and transactional currency headwinds. In 4Q19, CoS increased by 9.1% and by 7.3% on a per hl basis.
- EBITDA: EBITDA increased by 2.7% in FY19 to 21 078 million USD as top-line growth and continued cost discipline enhanced by synergy capture was partially offset by elevated cost of sales per hl. EBITDA margin contracted by 65 bps to 40.3%. In 4Q19, EBITDA declined by 5.5% to 5 343 million USD with margin contraction of 336 bps to 40.1%.
- Net finance results: Net finance costs (excluding non-recurring net finance results) were 4 355 million USD in FY19 compared to 6 844 million USD in FY18. The decrease was predominantly due to a mark- to-market gain of 898 million USD in FY19 linked to the hedging of our share-based payment programs, compared to a loss of 1 774 million USD in FY18, resulting in a swing of 2 672 million USD. In 4Q19, net finance costs were 2 309 million USD compared to 2 162 million USD in 4Q18.
- Income taxes: Normalized effective tax rate (ETR) decreased to 23.0% in FY19 from 27.5% in FY18 and decreased to 24.5% in 4Q19 from 33.0% in 4Q18. Excluding the impact of gains and losses relating to the hedging of our share-based payment programs, our normalized ETR was 24.9% in FY19 as compared to 23.4% in FY18 and 17.2% in 4Q19 as compared to 24.7% in 4Q18.
- Profit: Normalized profit attributable to equity holders of AB InBev was 8 086 million USD in FY19 versus 6 248 million USD in FY18 and was 962 million USD in 4Q19 versus 1 405 million USD in 4Q18. Underlying profit (normalized profit attributable to equity holders of AB InBev excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 7 196 million USD in FY19 as compared to 8 099 million USD in FY18 and was 1 729 million USD in 4Q19 as compared to 2 306 million USD in 4Q18.
- Earnings per share (EPS): Normalized EPS in FY19 was 4.08 USD, an increase from 3.16 USD in FY18 and 0.48 USD in 4Q19, a decrease from 0.71 USD in 4Q18. Underlying EPS (normalized EPS excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 3.63 USD in FY19, a decrease from 4.10 USD in FY18, and 0.87 USD in 4Q19, a decrease from 1.17 USD in 4Q18.
- Dividend: The AB InBev Board proposes a final dividend of 1.00 EUR per share, subject to shareholder approval at the AGM on 29 April 2020. When combined with the interim dividend of 0.80 EUR per share paid in November 2019, the total dividend for FY19 would be 1.80 EUR per share. A timeline showing the ex-coupon dates, the record dates, and the payment dates can be found on page 20.
- Hyperinflation: The restatement of 9M19 under hyperinflation using the December purchasing power and closing rate had a positive impact of 55 million USD on revenue and 30 million USD on Normalized EBITDA on the FY19 reported organic growth. The impact of 9M19 restatement under hyperinflation is excluded from the 4Q19 organic calculation and identified separately in Annex 2.
- Deleveraging: Accounting for the proceeds expected to be received from the divestment of the Australian operations (while excluding the last 12 months EBITDA from the Australian operations), our net debt to EBITDA ratio would be 4.0x for the 12-month period ending 31 December 2019.
- Combination with SAB: In 3Q19, we completed the delivery of the 3.2 billion USD synergies and cost savings on a constant currency basis as of August 2016 resulting from the combination with SAB.
- 2019 Full Year Financial Report is available on our website at www.ab-inbev.com.
(i) Impact of COVID-19: The impact of the COVID-19 virus outbreak on our business continues to evolve. 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. For the first two months of 2020, we estimate that the outbreak has resulted in lost revenue of approximately 285 million USD and lost EBITDA of approximately 170 million USD in China.
(ii) Overall Performance: We will continue to evolve our top-line growth to be more balanced between volume and revenue per hl, as we employ the category expansion framework across our footprint to reach new consumers with different price points and styles. In FY20, we expect EBITDA growth of 2-5%, with the majority of our growth to be delivered in the second half of the year. In 1Q20, we expect EBITDA to decline by around 10% given the impact of COVID-19 on our results as well as a challenging comparable, especially in Brazil. The outlook for both FY20 and 1Q20 reflects our current assessment of the scale and magnitude of COVID-19, which is subject to change as we continue to monitor the development of the outbreak.
(iii) Cost of Sales: We expect CoS per hl to increase by mid-single digits.
(iv) Net Finance Costs: We expect the average gross debt coupon in FY20 to be approximately 4.0%. Net pension interest expenses and accretion expenses including IFRS 16 adjustments (lease reporting) are expected to be approximately 180 million USD per quarter. Net finance costs will continue to be impacted by any gains and losses related to the hedging of our share-based payment programs.
(v) Effective Tax Rate (ETR): We expect the normalized ETR in FY20 to be in the range of 27% to 29%, excluding any gains and losses relating to the hedging of our share-based payment programs.
(vi) Net Capital Expenditure: We expect net capital expenditure of around 5.0 billion USD in FY20 as we are increasing investments in innovation and consumer-centric initiatives.
(vii) Debt: Approximately 40% of our gross debt is denominated in currencies other than the US dollar, primarily the Euro. Our optimal capital structure remains a net debt to EBITDA ratio of around 2x.
(viii) Dividends: We expect dividends to be a growing flow over time, although growth in the short term is expected to be modest given our deleveraging commitments.