[Press Release:]
(BeerPulse Note: Below are excerpts from Anheuser-Busch InBev’s 20-page earnings report. Note that the report does not include any mentions of The High End brands like Goose Island else we would post those here.)
Global Highlights
Revenue: Revenue grew by 5.0% in the quarter, with revenue per hl growth of 3.2%. On a constant geographic basis, revenue per hl grew by 3.6%, driven by revenue management initiatives as well as continued premiumization. In HY17, revenue grew by 4.4% with revenue per hl growth of 4.2%. On a constant geographic basis, revenue per hl grew by 4.1%.
Volume: Total volumes grew 1.0%, while own beer volumes were up by 2.1%. Good growth in own beer volumes was achieved in South Africa, Mexico and Australia, while declines were recorded in the US, Brazil and Colombia. In HY17, total volumes were up 0.3% with own beer volumes up 1.0%.
Global Brands: Combined revenues of our three global brands, Budweiser, Stella Artois and Corona, grew by 8.9% in 2Q17. Budweiser revenues grew by 5.7%, with 11.7% growth in revenues outside of the US. Stella Artois revenues grew by 6.6%, driven mainly by growth in Argentina and South Korea. Corona had a solid quarter as well, with revenues growing 16.6%, with 26.2% growth in revenues outside of Mexico, as a result of strong growth in the UK, Australia and China. In HY17, the combined revenues of our global brands grew by 10.6%.
Cost of Sales (CoS): CoS increased by 3.2% in 2Q17 and by 1.3% on a per hl basis. On a constant geographic basis, CoS per hl increased by 2.2%, with savings from synergies partially offset by the anticipated transactional currency and commodity impacts in Latin America North and Latin America South. In HY17, CoS grew by 4.3% in dollars and by 4.2% on a per hl basis. On a constant geographic basis, CoS per hl increased by 4.3% in HY17.
EBITDA: EBITDA grew by 11.8% as a result of healthy top-line growth, helped by strong synergy capture, and partly offset by CoS pressure, as anticipated. EBITDA margins expanded by 238 bps to 37.7%. In HY17, EBITDA grew by 9.0% and EBITDA margin expanded by 161 bps to 37.5%.
Net finance results: Net finance costs (excluding non-recurring net finance costs) grew from 726 million USD in 2Q16 to 1 628 million USD in 2Q17 predominantly due to a mark-to-market loss of 265 million USD in 2Q17, linked to the hedging of our share-based payment programs, compared to a gain of 444 million USD in 2Q16, resulting in a swing of 709 million USD. Net finance costs were 3 120 million USD in HY17 compared to 1 945 million USD in HY16.
Income taxes: Income tax expense in 2Q17 was 575 million USD with a normalized effective tax rate (ETR) of 21.3%, compared to an income tax expense of 497 million USD in 2Q16 and a normalized ETR of 20.5%. The normalized ETR was 20.9% in HY17 compared to 21.5% in HY16.
Profit: Normalized profit attributable to equity holders of AB InBev increased from 1 727 million USD in 2Q16 to 1 872 million USD in 2Q17, with organic EBITDA growth partially offset by higher net finance costs. Normalized profit attributable to equity holders of AB InBev increased from 2 571 million USD in HY16 to 3 331 million USD in HY17.
Earnings per share: Normalized earnings per share (EPS) decreased from 1.06 USD in 2Q16 to 0.95 USD in 2Q17, with higher profits more than offset by a negative impact of mark-to-market adjustments linked to the hedging of our share-based programs and the increased number of outstanding shares. Normalized EPS increased from 1.57 USD in HY16 to 1.69 USD in HY17.
Combination with SAB: The business integration is progressing well, with synergies and cost savings of 335 million USD captured during 2Q17.
2017 Half Year Financial Report: The report is available on our website at www.ab-inbev.com.
United States
Our US business continued to deliver EBITDA growth in the first half of this year on the heels of a good 2016 financial performance. This quarter we continued to see a strong performance from our Above Premium brands, which helped offset the challenges we are facing with our Premium brands.
Revenue for the quarter decreased by 0.2% in 2Q17 and by 1.3% for HY17. Revenue per hl grew by 0.9% in 2Q17, negatively impacted by brand shipment mix, and by 1.5% in HY17. Our pricing strategy remains to target pricing in line with inflation.
We estimate that industry STRs in the United States declined by 0.7% in 2Q17 and by 1.1% in HY17, in line with 2016 industry performance. Our own STRs were down 3.0% in both the quarter and HY17, with STWs down 1.1% in the quarter and down 2.7% in the half year. STRs and STWs have therefore converged during the first half, with stock levels well-placed to meet summer demand.
We estimate a decline in total market share of approximately 105 bps in 2Q17, as we cycled a strong comparable versus 2Q16. We estimate a decline of 85 bps in HY17. We are not pleased with our market share performance and we will continue to work to balance the share and profitability equation while fine-tuning our regional pack-price strategy and leveraging our strong wholesaler system.
Our Above Premium brand portfolio continued to perform well, gaining approximately 35 bps of total market share in the quarter (30 bps in HY17). Michelob Ultra was the top share gainer in the US for the ninth consecutive quarter and continues to grow volumes by double-digits as a result of its consistent “Active Lifestyle” positioning and increased support behind the brand. Stella Artois had another strong quarter, and was the fastest growing European imported beer according to IRI. Our craft portfolio also continued to gain share.
Our Value brands continued to show improved trends within the quarter, especially within the Busch brand family. These brands continue to retain a loyal consumer base while requiring minimal investment.
The US Premium segment remains under pressure, as consumers continue to trade-up to high end brands. This is resulting in positive trends for many brands across our portfolio, but is putting pressure on Budweiser and Bud Light, which lost 40 bps and 90 bps of share in 2Q17, respectively.
Overall, we are seeing positive momentum behind our Budweiser “America” campaign and encouraging signs from the new “Friendship” platform for Bud Light. These results present an opportunity for positive brand health moving forward, which better positions us for success in the long term. We’ve also taken the Budweiser “America” campaign to the State level, launching specific packaging to celebrate the locations of our 12 main breweries. Additionally, for Bud Light, we have developed local programming for key Hispanic markets as we bring the Friendship platform to life for more Americans.
Despite soft volumes, disciplined cost management generated 3.9% organic EBITDA growth for the quarter with EBITDA margin up 168 bps to 42.2%. We continue to expand our gross profit margin, which grew by 45 bps to 62.2% in 2Q17. In HY17, organic EBITDA grew 1.4% with EBITDA margin up 110 bps to 41.3%.