BUD Financial Analysis

Analysis Date: 1/24/2025

Business Model

Anheuser-Busch InBev (AB InBev) generates revenue through the sale of beer, non-beer beverages, and third-party products across a diversified global footprint. Key revenue drivers include brand portfolio strength, premiumization, digital B2B platforms (BEES), and direct-to-consumer (DTC) ecosystems.

Revenue Sources

• Beer sales, encompassing a wide portfolio of global, multi-country, and local brands (e.g., Budweiser, Corona, Stella Artois, Michelob Ultra, etc.).
• Non-beer beverage sales, including flavored malt beverages, seltzers, and non-alcoholic beverages.
• Third-party product sales through BEES Marketplace, expanding offerings beyond AB InBev's own products.
• Direct-to-consumer (DTC) channels like Zé Delivery, TaDa Delivery, and PerfectDraft, enhancing consumer reach and data collection.

Revenue Distribution by Channel

• 72% of revenue is generated through B2B digital platforms, primarily BEES.
• Approximately 140 million USD of revenue generated by the digital direct-to-consumer ecosystem in Q3 2024.

Income Statement Analysis

• Revenue decreased by 3.4% in reported terms, but organically grew by 2.1%, indicating positive underlying business performance despite currency translation and scope changes. Pro: Organic revenue growth is positive. Con: Reported revenue decreased.
• Cost of sales decreased by 7.0%, outpacing the revenue decrease, contributing to a higher gross profit in reported terms. Pro: Improved cost management.
• SG&A expenses decreased by 2.0%, indicating effective cost control measures. Pro: Improved operational efficiency.
• Normalized EBIT increased by 1.6% and Normalized EBITDA increased by 7.1%, showcasing improved profitability from core operations. Pro: Enhanced profitability from operations.
• Profit attributable to equity holders significantly increased by 40.7%, driven by operational improvements and non-underlying items. Pro: Substantial increase in bottom-line profit.

Capital Allocation

AB InBev's capital allocation strategy prioritizes: 1) Investing in organic growth, focusing on brand building, premiumization, and digital transformation. 2) Selective M&A to expand market presence and portfolio. 3) Deleveraging to maintain a robust financial position. 4) Return of capital to shareholders through dividends and share buybacks. Recently, a 2 billion USD share buyback program was approved, indicating a focus on shareholder returns and confidence in cash flow generation.

Management Commentary

EBITDA increased by 7.1% and Underlying EPS growth of 14%.

FY24 EBITDA growth outlook raised to 6-8%.

Share buyback program of 2 billion USD approved.

Revenue declined by double-digits in China, impacted by soft industry.

Overall volume performance was impacted by a soft consumer environment in China and Argentina, resulting in an overall decline of 2.4%.

Overall Sentiment: Positive to cautiously optimistic. Management expresses confidence in their strategy and raises FY24 outlook, supported by strong EBITDA and EPS growth, and a new share buyback program. However, they acknowledge challenges in specific markets like China and Argentina due to soft consumer environments. The focus on premiumization, digital transformation, and cost management suggests a proactive approach to navigating market headwinds.

Recommendation

Rating: Hold

Reason for Rating: Hold recommendation based on a balanced view of positive earnings growth and strategic initiatives against volume declines and market specific challenges.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information (Q3 2024 Earnings Press Release) and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 1/24/2025, 4:54:58 AM