Annual results: AB InBev suffers a Covid-19 hangover

By Stephen Gunnion 25 February 2021

The global brewing giant has reported revenue and volume declines for 2020, but expects a better outcome this year as the pandemic recedes and beer drinkers continue to navigate their way around ongoing restrictions.

Stephen Gunnion

South Africa may be small beer for Anheuser-Busch InBev. However, last year’s alcohol bans added further pressure on global sales that were disrupted by the outbreak of Covid-19, resulting in bars, clubs and restaurants closing their doors. 

The global brewing giant has reported a decline in revenue for 2020 as it sold less beer and an even bigger drop in earnings before interest, tax, depreciation and amortisation (Ebitda) – a key measure of operational profitability. However, it said sales recovered towards the end of the year as consumers adjusted to the new reality and entertained themselves at home – with alcohol, of course.

South America was the only region where volumes improved, supported by beer-drinking Brazilians. While volumes were just 1.4% lower in North America, the brewer recorded double-digit declines in Middle America, the Asia-Pacific, Europe, the Middle East and Africa. In Mexico, sales suffered due to a two-month government-mandated shutdown of its operations in the second quarter of last year. 

“Our business in South Africa was significantly impacted by three outright government-mandated bans on the sale of alcohol over the course of 2020, which resulted in double-digit volume, revenue and Ebitda declines, and significant Ebitda margin contraction,” AB InBev said in its results statement. 

Outside of the bans, AB InBev said it saw solid underlying consumer demand for its portfolio of drinks and flavoured alcohol beverages like Brutal Fruit and Flying Fish throughout the year, resulting in estimated market share gains in both beer and total alcohol. 

As a result of the most recent sales prohibition, the company suspended its obligations to retain workers and investments that were part of its $106-billion takeover of SABMiller in 2016. South African Breweries also took the government to court in January to challenge the prohibition’s legality.  

While profit edged up towards the end of last year, it said its performance for the first quarter of this year would be significantly affected after a dry January for South Africans. 

“Our top priority remains the safety and wellbeing of our people and our communities and we will continue to collaborate with the government on meaningful, lawful measures to combat the pandemic (such as curfews, capacity restrictions and limits on trading hours),” AB InBev said.  

“However, we believe that complete bans on alcohol sales significantly damage the South African economy, threaten the over one million livelihoods at stake throughout the alcohol industry’s value chain and entrench illicit alcohol trading, which has devastating consequences from both a health and economic perspective.” 

For the group as a whole, revenue declined by 3.7% in the year to December as volumes fell by 5.7%. Sales of its global brands, Budweiser, Stella Artois and Corona, decreased by 5%. Ebitda declined by 12.9% to $17.3-billion. Net finance costs for the year amounted to $5.96-billion, up from $4.26-billion, as a result of a $1.21-billion mark-to-market loss linked to the hedging of its share-based payment programmes. 

Net profit for the year more than halved to $3.81-billion, but underlying net profit, which excludes the mark-to-market gains and losses and the impact of hyperinflation, was 30% lower at $5.02-billion. On the same basis, underlying earnings per share came in 31% lower at $2.51. Headline earnings per share sank 86% to 66 US cents. It declared a full-year dividend of 50 euro cents per share. 

While the ongoing disruption caused by Covid-19 continued to create uncertainty, AB InBev expects revenue and earnings to improve meaningfully this year versus 2020 as the pandemic recedes and consumers continue to navigate their way around ongoing restrictions. DM/BM 


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