Covid crisis weighs heavily on AB InBev

AB InBev has suffered a huge downturn in beer sales last quarter, due to the measures to stop the spread of Covid-19. Profits went downhill even faster for the world’s largest brewery group, which also had to admit a huge impairment in Africa.

Melting profits

The Belgian group’s quarterly turnover went down 17.7 % to 10.3 billion dollars (8.8 billion euros), as total volumes went down by 17.1 %. The combined sales of its three global brands (Budweiser, Stella Artois and Corona) fell just a little less deep (- 16.6 %).

The company was quick to point out the hopes that the worst of the coronavirus crisis is already behind us: while volumes went down by 32.4 % in April, the May decline was ‘only’ 21.4 % and June even saw a tiny volume growth (+ 0.7 %), a press release says.

The company’s gross profit (ebitda) went down 34.1 % tot 3.414 billion dollars (just shy of three billion euros), with which the company still beat the average analyst’s prediction of a 36.4 % drop. Net profit fell from 2.48 billion dollars to just 351 million dollars (300 million euros).

Impairment

The pandemic also forced AB InBev to record an impairment of 2.5 billion dollars (2.1 billion euros) due to disappointing results in Africa. The 1.9 billion dollars AB InBev gained with the divestment of Australian activities was not enough to fully compensate for this impairment.

Belgian business newspaper De Tijd sees in this impairment another proof that AB InBev paid way too much for SABMiller in 2016. That acquisition cost the brewery group a whopping 102 billion dollars (then some 90 billion euros) and is the cause for AB InBev’s monumental debt burden.