Morning Note: Market news and an update from Anheuser-Busch InBev.

Market News

US equity markets were little changed last night – S&P 500 (+0.1%), Nasdaq (-0.1%) – while this morning in Asia, the main indices moved lower: Nikkei 225 (-1.6%); Hang Seng (-0.8%); Shanghai Composite (-0.6%). Nintendo fell on weak earnings. The FTSE 100 is currently trading 0.3% higher at 8,338. Reuters reports that France’s Finance Minister Le Maire is considering the possibility of a tax on share buybacks.

The Federal Reserve’s Kashkari said he questions policy restrictiveness given inflation data and was latest central banker to talk about a higher neutral rate – he raised his projection by 50 bp to 2.50%. The 10-year Treasury yield remained below 4.5%, while gold trades at $2,311 an ounce.

The oil price drifted to $82.12 a barrel. There appears to have been no discussion among OPEC+ members of an increase in output.

The US revoked the licenses that allow Intel and Qualcomm to supply Huawei with chips for its laptops and mobile phones, people familiar said. PIF-backed Alat said it would divest from China if it were asked to do so by the US.

Renewable sources provided a record 30% of electricity last year and that trend is set to accelerate, according to Ember. The group expects fossil fuel-derived power generation to drop 2% in 2024.

Source: Bloomberg

Company News

Anheuser-Busch InBev has this morning released Q1 results which were slightly ahead of market expectations and confirmed its full-year profit outlook. In response, the shares are up 4% in early trading.

AB InBev is a global brewing company with more than 500 beer brands, including Budweiser, Stella Artois, Becks, Corona, Modelo, and Leffe. The group’s premium portfolio represents over 30% of revenue and continues to benefit from the global trend to ‘drink less, drink better’. New products continue to contribute to growth, with the group’s innovation portfolio making up 10% of revenue. The portfolio has been expanded to address key consumer trends in health and wellness (low and no alcohol) and into products beyond beer (i.e. hard seltzers and canned cocktails). In 2023, the company generated sales of more than $59bn.

In the three months to 31 March 2024, revenue grew by 2.6% in organic terms to $14.5bn, with growth in around three quarters of its markets. Revenue per hl was up 3.3%, driven by ongoing premiumisation and revenue management initiatives.

Total volume fell by 0.6% during the quarter, made up of group own beer (-1.3%), non-beer (+3.5%), and third-party products (+2.0%). Volume growth in EMEA (+5.4%) and Middle Americas (+4.2%) was mainly offset by weakness in North America (-9.9%) and Asia Pacific (-4.8%).

Combined revenue of the group’s global brands (Budweiser, Stella Artois, Corona, and Michelob Ultra) grew by 5.2% outside their home markets.

The premium portfolio grew revenue in the low single digits. The global no-alcohol beer portfolio continued to outperform, delivering high-teens revenue growth in the quarter. Beyond Beer continued to add profitable growth, with $320m of revenue in the year, with a low single-digit volume increases, as growth globally was partially offset by weakness in malt-based seltzer in the US.

Investment in direct-to-consumer ecommerce platforms continued to pay off, with online sales of $130m. The group now generates 70% of its revenue through B2B digital platforms.

EBITDA, the group’s key measure of profitability, grew by 5.4% to $5.0bn, with the margin up 90bps to 34.3% as a result of disciplined overhead management which enabled increased sales and marketing investment. Underlying EPS rose by 16% to 75c, better than the market expectation of 67c.

The group’s priority for capital allocation is to invest behind its brands and to take full advantage of organic growth opportunities. Second is deleveraging the balance sheet – net debt to EBITDA remains high (3.38x at the end of 2023). The final priority is the return of excess cash to shareholders in the form of dividends (up 9% in 2023) and share buybacks. The group completed its $1bn share buyback programme announced in October 2023 and executed an additional $200m direct share buyback from Altria.

Looking forward, the group continues to expect EBITDA to grow in line with its medium-term outlook of 4%-8%.

Source: Bloomberg