Anheuser-Busch InBev Polishes Off a Tough Year

Anheuser-Busch InBev (BUD 1.16%) released fourth-quarter 2016 results Wednesday evening, highlighted by significant synergies related to the completion of last quarter's combination with SABMiller, as well as a return to modest year-over-year revenue growth, thanks to the company's "premiumization" and revenue management initiatives. Nonetheless, AB-InBev shares are down around 3.6% in Thursday afternoon trading as of this writing. Let's take a closer look at what the brewing giant accomplished as 2016 came to a close, and what investors can expect going forward.

IMAGE SOURCE: AB-INBEV.

 

Anheuser-Busch InBev results: The raw numbers

*Reference base, which includes the results of SABMiller as if the combination had taken place at the beginning of Q4 2015.
**As reported.
DATA SOURCE: Anheuser-Busch InBev.

What happened with Anheuser-Busch InBev this quarter?

• Organic revenue growth was 0.2% during the quarter.
• Revenue per hectoliter grew 3.9%. The positive effects of revenue management and premiumization initiatives were only partially offset by continued weakness in Brazil.
• Net income per share declined, primarily due to a combination of funding of the SABMiller transaction, an increase in net finance costs, negative foreign-exchange translation, and non-cash mark-to-market adjustments related to share-based compensation.
• Total volumes fell 3.3% year over year during the quarter, including a 3% decline in beer volumes and a 4.4% drop in non-beer volumes. Even so, AB-InBev saw improving market-share trends in most key markets.
• Global brand revenue increased 2.8% year over year during the quarter, including growth of 2.8% from Budweiser, 6.3% from Stella Artois, and 14.3% from Corona.
• Realized $282 million of synergies and cost savings related to the SABMiller combination between April 1, 2016 and Dec. 31, 2016, on top of the $547 million reported by SABMiller as of March 31, 2016.

What management had to say

Regarding the prospects the SABMiller integration, which is "well underway," AB-InBev management reiterated:

We expect the combination to generate significant growth opportunities, benefiting our stakeholders. We now have operations in virtually every major beer market. We have strengthened our position in developing regions, with excellent growth prospects in Asia, Central and South America, and Africa, which will play a key role in our company going forward. Our joint portfolio of more than 500 beers includes seven of the top 10 global beer brands and 18 brands that generate more than $1 billion in retail sales. By marketing our brands through a largely complementary distribution network, we will provide more choices for more consumers around the world.

Management also elaborated on AB-InBev's geographic performance:

While Brazil had a tough year, our global story had a number of silver linings. We saw strong performances in other key markets, including double-digit top-line growth in Mexico, as well as gains in overall preference for our brands. In Europe, our top-line grew 4.5% over FY15, driven by the evolution of our premium brands. Meanwhile, the U.S. continued to gain traction and FY16 saw EBITDA growth of 2.2%. Despite a decline in Chinese beer industry volumes, we continued to make gains in market share and profitability.

Looking forward

For the full year of 2017 -- and despite increased volatility in some key markets -- AB-InBev expects to accelerate overall revenue growth with the help of continued strength in its global brands and commercial revenue management initiatives. The company also increased its guidance for synergies and cost savings related to the SABMiller combination, to $2.8 billion (up from $2.45 billion previously). As it stands, the company has already captured just over $800 million of that total, and expects to realize the remaining $2.0 billion over the next three to four years.

All things considered, there were no big surprises this quarter from AB-InBev, even as the company continues to navigate the inherent challenges -- and realize the benefits -- of its massive global scale.