AB InBev’s second quarter sales pick up encouraged by June recovery in Mexico, South Africa

BELGIUM – The world leading brewer, Anheuser Busch InBev (AB InBev) has reported a 17.7% decline in revenue to US$10.2 billion in the second quarter impacted by the COVID-19 pandemic.

In the half year period 2020, revenue declined by 12.0% to US$21.2 billion, though revenue per hl did actually increase by 1.6%.

According to the brewer, in April, its volumes declined by 32.4%, as it faced a shutdown of its beer operations in key markets such as Mexico, South Africa and Peru, and the closure of the on-premise channel in most of our markets.

In May the company saw a sequential improvement, with a volume decline of 21.1%. This improvement was driven by a return to positive volume growth in China, a healthy performance from our beer business in Brazil, the gradual reopening of the on-premise channel in certain markets, particularly in Europe, and the strength of the off-premise channel in both developed and developing markets.

In June, it delivered a volume growth of 0.7%, as it witnessed significant recovery in Mexico and South Africa, where the resumption of operations was met with robust consumer demand.

“We are excited about the return of these consumption occasions, while remaining cautious as we are now seeing renewed on-premise restrictions in certain markets.

“South Africa implemented a second ban on alcohol sales in mid-July, which will impact our results in 3Q20,” stated the company.

Its total volume for the quarter declined by 17.1% with own beer volumes declining 17.2% and non-beer volumes down by 15.5%.

In HY20, total volumes declined by 13.4%, with own beer volumes down by 14.0% and non-beer volumes down by 7.6%.

Lower sales pushed down normalized first-half profits to US$76m from US$4.7bn a year earlier.

Its EBITDA in the quater declined by 34.1% to US$ 3.4 billion with margin contraction of 8.25% to 33.2%, due to the top-line decline and lower operational leverage, especially in the beginning of the quarter when we faced significantly reduced volume.

In HY20, EBITDA declined by 24.7% to US$7.3 Billion and EBITDA margin contracted by 5.85% to 34.6%.

In view of the economic uncertainties caused by the COVID-19 pandemic, the company performed an impairment review considering different scenarios.

However, it revealed that it was exposed to a risk of impairment for the South Africa and Rest of Africa cash generating units under the worst case scenario.

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Due to this it concluded that it was prudent to recognize a US$2.5 billion non-cash goodwill impairment charge applying a 30% probability of occurrence of the worst case scenario.

This charge is partially offset by a US$1.9 billion gain on the disposal of the Australian operations.

AB In Bev also stated that it has been investing behind capabilities such as B2B platforms, e-commerce channels and digital marketing for several years. “These trends have accelerated over the past few months, positioning us well to capture growth.”

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