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Anheuser Busch Inbev, Disappoints

|About:Anheuser-Busch InBev SA/NV (BUD)

As mentioned in my short idea and article of July 2 Anheuser Busch Inbev A Great Company For The Long Run the brewer (NYSE:BUD) came with disappointing numbers.

Second quarter EPS grew 22% year-over-year to $1.22, clearly above consensus estimates of $1.09, on a lower-than-anticipated tax rate (12.6% vs. expected 20.6%). The beat at the EPS level is the brightest spot. Other figures came in almost entirely below expectations:

Sales -0.8% to $9.87 billion (est. $9.94 billion), normalized EBITDA -4.1% to $3.59 billion (est. $3.74 billion) and margin -80 basis points to 36.4% (est. 37.6%).

On an organic basis, sales +4.7% (est. +5.5%) with volume -0.1% (est. +1.3%) and EBITDA +2.5% (est. +6.2%).

Asia Pacific (organic sales +19.3% and EBITDA margin +120 basis points to 15.2%) was the only region beating estimates. North America posted organic sales growth of 2.3% (est. +2.3%), but EBITDA declined 1.2% (est. +3.5%) and margin was down 140 basis points to 41.9% (est. 43.9%). Organic volume dropped 1.8% (est. -1.0%) with sales-to-wholesalers (STWs) -2.1% and sales-to-retailers -0.2%. The hot weather in the US seems not to have boosted sales. In Brazil, organic volume growth was 2.3%, lagging sector development of 3.1%, which led to a share decline of 20 basis points to 68.8% in Q2.


The company reiterated FY12 guidance, including price increase ahead of inflation, mid single-digit input costs inflation, good momentum in its US beer business, positive volume growth in Brazilian beer operations, a slightly lower tax rate, and net debt/EBITDA below 2x before M&A activity (e.g. Modelo) this year and below 2x including M&A by 2014.

Final Note

Anheuser Busch Inbev's Q2 results disappointed. Especially the margin development was a negative surprise. Volume trends in its biggest markets, the US and Brazil, were rather sluggish. Although outlook was confirmed, the relatively weak Q2 figures should put the stock under profit-taking pressure, after its very strong run in the recent two months. A buy under $70, but for now a shorting candidate.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: BUD