City News: AB InBev’s new top team will benefit from post-lockdown resurgences

AB InBev confirmed on Thursday that CEO Carlos Brito will step down after 15 years in charge

The world’s largest brewer AB InBev pointed to an industry resurgence in 2021, with a new management team set to benefit from the reopening of the global leisure sector.

AB InBev confirmed on Thursday that CEO Carlos Brito would step down after 15 years in charge, to be replaced by North America chief Michel Doukeris, amid a strong rebound of first quarter sales as coronavirus restrictions eased across key markets.

Total volumes grew by 13.3% in the first three months of the year, with own beer volumes up by 14.9% and non-beer up by 4%. That growth was heavily driven by its core global brands, as sales of Budweiser, Stella Artois and Corona grew by 29.5% and by 46.4% outside their home markets.

Total revenues grew at an even faster rate of 17.2% as revenue per hl rose 3.7%, driven by ongoing premiumisation and “revenue management initiatives” at the business.

While a 2021 rebound is not unexpected after the widespread shuttering of the on-trade last year, AB InBev pointed out it delivered own beer volume growth of 2.8% even compared with pre-pandemic levels of the same quarter in 2019, despite continued restrictions in markets in Europe and a temporary alcohol ban in South Africa.

Revenue growth also translated to an EBITDA increase of 14.2%, with AB InBev predicting normalised full-year EBITDA will grow between 8%-12% and revenue ahead of this level, driven by combination of volume and price.

Bernstein said incoming CEO Doukeris “was the clear lead internal candidate” and well placed to build on the groundwork Brito had laid to shift back to growth. “With AB InBev rapidly emerging from the Covid crisis, the stars seem aligned,” the broker said.

Jefferies suggested the market would welcome the internal appointment as it “puts the bears’ thesis of external candidate ‘kitchen sink’ to bed”. “ABI remains a key re-opening trade for 2021 with momentum improving and favourable valuation,” it said.

Barclays highlighted its improvement in pricing architecture, which was ahead of expectations and augurs well for future margin improvements. “The CEO announcement will allow investors to reformulate views on a company which appears to be at the start of a positive transition. We expect these results to be well received, and attract further investment from holders wanting to go on a long-term journey with an improving business.”

AB InBev has grown its market dominance significantly under Brito’s 15-year tenure, most notably via its mega-merger with South African brewer SAB Miller in 2016. However, that deal has left ABI with net debt of more than US$80bn and its share price has approximately halved since the SAB deal.