Anheuser-Busch InBev Rides Global Brand Strength to a Delicious Quarter

Image source: Anheuser-Busch 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, and excludes results of businesses sold since the combinatino was completed.
**As reported.
Data source: Anheuser-Busch InBev.

What happened with Anheuser-Busch InBev this quarter?

• Revenue was well above the $12.68 billion investors were expecting.
• Organic revenue growth was 3.5% during the quarter.
• Revenue per hectoliter increased 4.3% (4.5% on a constant-geographic basis), thanks to revenue management initiatives and strength from premium brands.
• Normalized earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 5.8%, to $4.809 billion, also above expectations for 3.3% growth.
• Note last year's Q1 profits were negatively impacted by a combination of pre-acquisition funding costs and mark-to-market losses linked to hedging of share-based compensation programs. This quarter's profit was bolstered by earnings of the newly combined businesses and gains from the the same hedging programs.
• Volumes fell 0.5% year over year, including a 0.2% decline in AB InBev own-beer volumes, a 2.7% decline in non-beer volumes, and 29.4% growth from third-party products.
• Global brands revenue grew 12.1%, including:
• 7.3% growth in sales of Budweiser, including 16.4% growth outside the U.S.
• 21.1% growth from Stella Artois, thanks to strength in the U.S. and Argentina.
• 18.2% growth from Corona, including 48.2% growth outside of Mexico driven by strength in Western Europe and China.
• Realized another $252 million in synergies related to the SABMiller merger. The integration of SAB "is progressing well."

What management had to say

AB InBev management elaborated in a prepared statement:

We will continue fueling the growth of our global brands by leveraging their respective commercial platforms with consistent communication and execution around the world, while expanding to new markets such as Australia, Peru, Colombia and South Africa. The SAB integration continues at a fast pace, with 252 million USD of synergies captured in 1Q17. Beyond the cost synergies, we are every day more excited about the top-line growth opportunities arising from the combination of these two great companies.

Looking forward

Despite ongoing volatility in some key markets, AB InBev continues to expect total revenue growth to accelerate for the full fiscal year 2017 driven by the success of global brands and revenue management initiatives. AB InBev also reiterated its expectation for capturing total cost savings related to the merger of $2.8 billion, leaving it yet to realize just under $1.75 billion of that total over the next few years. Finally, AB InBev expects modest dividend growth over time, even as it continues to deleverage its balance sheet.

In the end, this was an admirable performance from AB InBev as it begins to demonstrate the strength of its unrivaled global presence. With shares still down around 3% over the past year as of this writing, it's no surprise to see investors toasting its relative outperformance today.