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

Market News

This morning in Asia, the yen jumped and Japanese government bond futures fell after the Bank of Japan’s Hajime Takata said the central bank’s price target has finally come into sight. Those comments put an April end to negative rates very much into play, Mark Cranfield wrote on MLIV.

Equity markets were mixed: Nikkei 225 (-0.1%); Hang Seng (-0.2%); Shanghai Composite (+2.0%, after regulators banned a top quant fund). After drifting lower last night, US equites are expected to open slightly down this afternoon. The FTSE 100 is trading 0.3% higher at 7,642. Stocks trading ex-dividend include Barclays (3.14%) and Diageo (1.06%). Brent Crude trades at $81.57 a barrel, while gold is $2,036 an ounce.

Jeremy Hunt considered scrapping Britain’s non-domiciled tax status as he seeks ways to fund pre-election giveaways in his budget next week. The move may bring in as much as £3.2bn in tax revenues. Sterling trades at $1.2665 and €1.1681.

Congressional leaders reached a deal to fund parts of the US government through to 30 September. Defence and Homeland Security departments still face a potential 23 March shutdown. The House is expected to vote on the deal today.

The global savings glut is drying up. The surplus identified by Ben Bernanke almost 20 years ago may turn into a shortfall. The result, according to some economists: long-term interest rates worldwide may head higher as borrowers are forced to pay up for a dwindling supply of excess cash.

Source: Bloomberg

Company News

Anheuser-Busch InBev has this morning released 2023 results which were in line with expectations and raised its dividend by 9%. In response, the shares are little changed 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, revenue grew by 7.8% in organic terms to $59.4bn. Revenue per hl was up 9.9% because of pricing actions, ongoing premiumisation, and other revenue management initiatives. Total volume fell by 1.7% during the year, made up of group own beer (-2.3%), non-beer (+2.1%), and third-party products (+4.7%). Growth in many of the group’s emerging and developing markets was primarily offset by performance in the US and a soft industry in Europe.

In the final quarter, revenue grew by 6.2% to $14.5bn, in line with market expectations, with revenue per hl up 9.3% and volume down 2.6%.

Combined revenue of the group’s global brands (Budweiser, Stella Artois, Corona, and Michelob Ultra) grew by 18.2% outside their home markets.

The premium portfolio grew revenue in the low teens. The global no-alcohol beer portfolio continued to outperform, delivering high-teens revenue growth in 2023. Beyond Beer continued to add profitable growth, with $1.5bn of revenue in the year, up by mid-single digits, 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 $550m. The group now generates 70% of its revenue through B2B digital platforms.

EBITDA, the group’s key measure of profitability, grew by 7.0% to $20.0bn, at the top-end of the 4%-8% guidance range. The margin fell by 23bps to 33.6%. Disciplined overhead management and efficient resource allocation partially offset commodity cost headwinds. Underlying EPS rose 1% to $3.05. The Q4 result was down 5% to 82c, but was above the market expectation of 78c,

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 at 3.38x. The final priority is the return of excess cash to shareholders in the form of dividends and share buybacks. The group has declared a dividend of 82c, 9% higher than last year. The group is currently executing a $1bn buyback programme, with $870m completed so far.

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

Source: Bloomberg