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Budweiser bottles of beer

AB InBev Eliminates CEO's Bonus as Earnings Trail Estimates

March 2, 2017
Q4 results missed estimates at many levels as Anheuser-Busch Inbev continues to struggle with a slump in its key market of Brazil.

Anheuser-Busch InBev NV (IW 1000/80) Chief Executive Officer Carlos Brito will miss out on a bonus for the first time since 2008 after earnings at the Budweiser maker missed analysts’ estimates for a seventh straight quarter.

Chief Financial Officer Luis Dutra will also get nothing from the bonus pool, the Leuven, Belgium-based company said Thursday as it announced an increase to its cost-saving target that left some analysts disappointed. The stock fell as much as 3.3% in Brussels.

It’s “another shocker, but that’s the trough,” wrote Eamonn Ferry, an analyst at Exane BNP Paribas. “We had feared the worst this quarter, and so it is. There may well be an element of kitchen-sinking here.”

CEO Carlos Brito

Fourth-quarter results missed estimates at almost all levels as the brewer continues to struggle with a slump in its key market of Brazil. The figures provide a reminder of why it paid $103 billion for main rival SABMiller. AB InBev on Thursday raised its target for savings from the acquisition by $350 million to $2.8 billion within three to four years, although some analysts had expected an increase of $600 million.

Adjusted fourth-quarter earnings before interest, tax, depreciation and amortization fell to $5.25 billion, the brewer said in a statement. Analysts expected $5.64 billion.

Brazil Nosedives

Spending power in Brazil, AB InBev’s largest market after the U.S., is nosediving amid record rates of unemployment, bedeviling consumer-goods makers including Nestle SA and Unilever. Lower shipments and a decline in AB InBev’s market share led to a 33% drop in earnings in that country. The maker of Stella Artois also warned that dividend growth will be modest as it reins in its $108 billion debt.

“Brazil is probably one of the most competitive markets we operate in,” Dutra said on a call with reporters.

Incomes in the country should rise in 2017, which will be positive for beer consumption, the CFO said. Still, the brewer forecast headwinds from Brazil’s weak currency to weigh on first-half results.

Dutra said results tend to rebound the year after management forgoes bonuses.

“This is the time when our leaders rise to the occasion,” he said. “Rather than being demotivated, we are usually more energized and perform better.”

The brewer said it aims for net debt of about about two times EBIDTA within a few years, after that ratio rose to 5.5 times at the end of last year.

Among other highlights:

  • AB InBev forecast revenue growth to accelerate in 2017.
  • Brewer to cut capex to about $3.7 billion this year after spending $4.8 billion in 2016.
  • Cost of sales per hectoliter forecast to increase by low single digits on constant geographic basis.

By Thomas Buckley

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Licensed content from Bloomberg, copyright 2016.

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