AB InBev's first-quarter revenue grew 13.2% on an organic basis, to $14.2bn. This was mainly driven by price hikes, but volumes also crept up by 0.9%. Revenues grew across all geographies and the ongoing premiumisation trend continued.
Underlying operating profit grew 14.9% to $3.5bn as revenue growth outstripped the rising operating costs.
Full-year cash profits (EBITDA) are expected to grow by 4-8%, with revenue growth estimated to run ahead of this level.
The shares were broadly flat following the announcement.
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Our view
AB InBev's got off to a good start in 2023. Double-digit revenue and underlying operating profit growth isn't something to be overlooked. The group's premiumisation strategy looks to be working and it's helping to offset rising input costs.
Crucially though, the beverage industry has been holding firm in the face of consumers with less cash to spare. AB InBev's volume growth is slim, but has continued to creep in the right direction for now. We'll continue to keep our finger on this pulse as the year progresses.
Last year, rising commodity prices kept a lid on how much of the revenue increase fed through to the profit line. If inflation calms this year, that trend should start to look more favourable - of course the opposite is also true.
Looking past some of the noise, in developed markets a trend towards more premium products presents the opportunity to boost both margins and revenues. That's played into the group's hands as strong brands like Budweiser, Stella and Corona have reaped the rewards of the shift.
Footholds in less-developed markets from Latin America to Sub-Saharan Africa mean there's scope for huge volume growth in the years ahead. Last we heard, premiumisation is a trend that's making its way into these regions too. Growth in Mexico, Brazil and Columbia was driven by more expensive brands.
Our biggest bugbear is the balance sheet, which is carrying too much debt. At the last count net debt was 3.5 times cash profit, a long way from the company's target of 2 times. Assuming cash flows and profits hold steady that's still over three years away. The Group's exposure to emerging markets means that if currencies move the wrong way, this target could be pushed out further.
There's no immediate concern, some 65% of scheduled debt obligations don't need repaying for five years or more and interest payments are very manageable. Nonetheless, we're keen ABI keeps its foot on the pedal where debt reduction's concerned.
AB InBev's enviable portfolio of brands and huge global footprint means revenues should be robust in most conditions. Its long-term growth opportunities shouldn't be dismissed either. But it's hard to get too excited when reducing debt, rather than reinvesting or returning to shareholders, is likely to be a priority for several years to come.
AB InBev key facts
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